Tuesday, 19 May 2020

Banning menthol and other flavourings in cigarettes

"Menthol use is likely associated with increased smoking initiation by youth and young adults. Further, the data indicate that menthol in cigarettes is likely associated with greater addiction. Menthol smokers show greater signs of nicotine dependence and are less likely to successfully quit smoking. These findings, combined with the evidence indicating that menthol’s cooling and anesthetic properties can reduce the harshness of cigarette smoke and the evidence indicating that menthol cigarettes are marketed as a smoother alternative to nonmenthol cigarettes, make it likely that menthol cigarettes pose a public health risk above that seen with nonmenthol cigarettes."
U.S. Food and Drug Administration2013
Despite an international scientific consensus in favour of banning menthol in tobacco products, the vast majority of countries continue to permit tobacco companies to add menthol to cigarettes.

The number which do will grow dramatically this week. On Wednesday (May 20th) the sale of menthol cigarettes will be banned in the 27 member states of European Union and also the United Kingdom.

Outside of Canada (and now Europe), only a handful of countries - Turkey, Moldova, Uganda and a few others - have ordered tobacco companies to stop adding menthol flavours to cigaretes. Some countries have tried and failed: tobacco companies used challenges (eg Brazil) or intensive lobbying (eg the USA) to prevent health authorities from taking this step.

All the more reason that Canadians should be proud and appreciative of the efforts of federal and health ministries for succeeding where others have failed or not ventured. This month we celebrate the 5th anniversary of Nova Scotia becoming the world's first jurisdiction to ban menthol in cigarettes. It was that province's strengthening of its Tobacco Access Act in May 2015 that set the stage for a now Canada-wide ban on flavoured cigarettes.

This post reviews the Canadian experience of restricting menthol and other flavouring additives in cigarettes, and some assessments of the benefits of such regulations. (A chronology of events is available on a downloadable fact sheet.)

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IMPLEMENTING FLAVOUR BANS IN CANADA

From the "candy coated" cigarillos of the early 2000s ...

Regulatory controls on cigarettes are stronger than those on cigars and other tobacco products. In the early 2000s, some tobacco manufacturers began to exploit that difference, introducing individually-packaged fruit- and candy- flavoured little cigars on to the market. These 'little cigars' were the same size and shape as cigarettes, and were sold with cigarette-type filters. Buy because the wrapping paper was made with tobacco leaves, they met the legal definition of cigars.

The strong appeal of these products to young Canadians was soon recognized, and in 2009 the federal government introduced the first law banning flavouring ingredients in some Canadian tobacco products. Menthol was exempted from these flavour restrictions, as were larger cigars and other tobacco products.

Sadly, this law was soon circumvented by companies which redesigned their products to take advantage of the remaining loopholes. Young people continued to be the primary market for this sweeter tasting smoking experience.

Quickly, both provincial and federal governments were encouraged to adopt more powerful restrictions, and to also ban menthol in cigarettes

... to more comprehensive bans on flavourings ...

Over the last half-decade, provincial, federal and territorial governments greatly strengthened restrictions on tobacco flavourings. Two approaches have been adopted:

1. Banning the use of additives, including flavouring agents. This is the approach taken by the federal government.

2. Banning the sale of cigarettes or other tobacco products which have a “characterizing flavour”. This is the approach generally taken by Canadian provinces.

Seven Canadian provinces and two territories have implemented bans on flavoured tobacco, including a ban on menthol cigarettes.

Nova Scotia was the first province to ban menthol in Canada (and one of the first in the world), a measure it introduced in the spring of 2015. Nova Scotia exempted some products from its ban, as did three other provinces and one territory which have adopted flavour restrictions. These are Alberta (2015), Ontario (2016), Newfoundland and Labrador (2017) and Northwest Territories (2020).

Three provinces and one territory have implemented comprehensive bans on flavours in all tobacco products: Quebec (2016), New Brunswick (2016), Prince Edward Island (2017) and Yukon (2020). 

In November 2018, a federal ban on the sale of menthol cigarettes came into force. 

.... although holes remain ....


The federal government has comprehensive restrictions on flavourings in cigarerettes, certain small cigars and blunts. There is an exemption for some alcohol-flavoured small cigars. Health Canada currently does not restrict the use of menthol or other flavour additives in large cigars, pipe tobacco, kreteks, waterpipe tobacco, snuff, chewing tobacco, roll your own tobacco or heated tobacco. These are, however, banned in some provinces, as shown below. 




.... and tobacco companies continue to exploit remaining loopholes.   

There is growing public concern about the role that flavours play in inducing young people to use vaping products and Canadian regulators are now grappling with regulating this new candy-coated addiction.

Again, Nova Scotia is providing leadership. It is the first Canadian province to take action on this issue - its ban on flavourings in e-cigarettes came into force on April 1.

Additional challenges are on the horizon. BAT has developed flavoured nicotine pouches (made without tobacco, and thus exempt from tobacco regulation). These are currently in sale in the UK and in the USA - where they are sold in a variety of flavours.  (These 'modern oral' products were discussed here earlier).

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HISTORIC NOTES ON THE CANADIAN MENTHOL MARKET

Menthol cigarettes have been successfully phased out 


Traditional menthol cigarettes have historically represented about 5% of the Canadian cigarette market. Capsule menthol products, highly popular in some countries, were sold only briefly here before the menthol ban came into force in November 2018. But with menthol bans in place in the most populous provinces by 2017, menthol products had already largely disappeared from the Canadian market the previous year.

Health Canada - Tobacco Sales in Canada: Key Trends. June 2018

Menthol bans have reduced smoking in Canada.

To date, public studies suggest that the menthol ban in Canada reduced the number of smokers. These include reviews of the Canadian experience by health researchers and also by British American Tobacco. Industry analysts have also predicted that menthol bans will reduce cigarette consumption.

Researchers at the University of Toronto and Health Canada recently published a review of the impact of the Canadian menthol ban. Michael Chaiton and his research partners compared data on cigarette sales from 2012 to 2017 from a Canadian province which did not ban menthol (British Columbia) with one that did (Ontario). The Ontario ban on menthol cigarettes came into force at the beginning of 2017. They found that in British Colmbia there were no significant changes in cigarette sales in 2017, but there were sharp declines in Ontario. "This suggests that menthol regulations in jurisdictions with a larger percentage of menthol smokers are likely to be highly effective."  

Another study led by Michael Chaiton followed a group of Ontario smokers before and after the ban on menthol. It found that those who had smoked menthol cigarettes regularly were more likely to have quit than were those who smoked regular cigarettes. Banning this additive resulted in an increased overall rate of quitting 1 year later.

British American Tobacco's report on events is consistent with the evidence that a ban on menthol will reduce cigarette smoking.  In a presentation to investors last year, it reported that while traditional menthol cigarettes had a market share of 4% (as Health Canada reported), the capsule market picked up an additional 10% of the market-share. BAT also reported on the impact of the menthol ban on smokers in Alberta. (slide 32), on whom it had hired Kantar to do follow-up surveys. One percent of all smokers (equal to 17% of menthol smokers) had stopped smoking cigarettes after the ban was in place. With Canada's low prevalence of menthol use, however, BAT found there was "no material industry impact post ban."

Industry trade analysts agreed. "The recent ban on menthol tobacco products, such as cigarettes, is likely to make it even harder for tobacco suppliers to recruit new young customers." Euromonitor wrote in its 2018 (not public) Report on Canada. Two years earlier, in another (subscription-based) review of the global tobaco market, it had predicted that the ban on menthol in Europe would reduce the number of cigarettes smoked by 25 billion.

Tuesday, 12 May 2020

The PATH that leads to understanding the vaping epidemic

Finding the PATH

Since 2013, there has been a remarkable survey operating in the United States that has deepened our understanding of tobacco and e-cigarettes use and consequences. It is the Population Assessment of Tobacco and Health Survey (PATH) - a longitudinal, nationally representative survey of 46000 Americans. This survey generates information on tobacco and e-cigarette use behaviours, and with its longitudinal design it interviews the same individuals every year. It is planned that the survey will continue at least until 2024.

Exploring the PATH

Data from this survey has already been analyzed and there at least 104 publications using PATH data. From these studies we have learned, for example, that e-cigarette users are more likely to progress to becoming combustible cigarette users, and that, in a longitudinal analysis, e-cigarettes use was associated with lung disease.

Following the PATH to more new discoveries

Recently, a multidisciplinary, multi-agency team of scientists has taken a deep dive into the PATH longitudinal data to explore the process of becoming a tobacco or e-cigarette user. Their findings were published this month in 10 papers in a special supplement to the journal Tobacco Control.

From cross-sectional data we can count the numbers of smokers, former smokers and never smokers, but we cannot discover how one moves from one behaviour to another. That can be learned from longitudinal data and that was the focus of this recently published work. Researchers studied the movements from one state to another as shown here: 




This diagram is actually a simplified depiction of the number of changes of state that can occur, as as it does not show movement from one product category to another. British American Tobacco also pays attention to how people move into and out of tobacco use and how they move from one product to another. Their diagrammatic representation of this process is considerably more complicated.



The simplified model of transitions shown in the Figure "Behavioral Transitions" can be applied to each product -- e-cigarettes, combustible cigarettes, cigars, hookah and smokeless tobacco. Further complication can be added by studying multiple use of products and movement from one product to another.

The papers in the Tobacco Control supplement address all these subjects, although the results are not presented in the most accessible style. However, the most widely used products are e-cigarettes and combustible cigarettes, so we will examine the findings concerning these products more closely.

Cigarette Smoking

Most of those who had smoked a cigarette in the past month in 2013-14 had done so again two years later. Fewer than one-third (29%) of youth, one-quarter (25%) of young adults and one-seventh (15%) of adults had two quit smoking two years later. Among those who had stopped in the year between, one-tenth of youth (11%) and one-thirtieth of adults (3%) had returned to smoking the following year.




E-cigarettes (ENDS)

It should be kept in mind that these papers study the first three waves of the PATH study, ending in 2016. The rise of closed-pod systems such as JUUL and other copycat brands that have grown to epidemic proportions among our youth has occurred since that date.

Still, trends up to 2016 show that there was already a developing youth epidemic of e-cigarette use. From Wave 1 to Wave 3 (2013 to 2016), use by youth (12-17) of e-cigarettes in the past 30 days grew from 3% to 4%. Among young adults (18-24), past 30-day use grew from 13% to 17%. Some of this e-cigarette use was experimental.

By Wave 3 (2016), 54% of the youth that had been using e-cigarettes at Wave 1 had discontinued e-cigarette use. The corresponding figure for young adults was 62%.




Poly-tobacco use 

The diagrams from the papers shown above do not capture the degree to which young people and adults use both cigarettes and e-cigarettes, although this PATH study confirms that most of those who used e-cigarettes were also smoking.

Among young adults, almost half of those who only used e-cigarettes at Wave 1 had stopped using any tobacco product over the two study waves (46%). Among those who used both e-cigarettes and combustible cigarettes, the proportion who ceased use of all nicotine products was much lower -- slightly more than 1 in 10 (12%). (Table 1)

Stanton et al, the authors of another study of PATTY data similarly concluded:
"The majority of ENDS use is polytobacco use, and ENDS polytobacco users who also use cigarettes are less likely to stop using tobacco 2 or 3 years later compared with exclusive ENDS users."

PATH-type studies in Canada?

There is currently no direct equivalent to the PATH study in Canada.

Previous longitudinal surveys involving smokers included the Survey on Smoking in Canada, which was launched in 1994 to assess the impact after the federal government cut tobacco taxes; the National Population Health Survey, which was in the field for more than a decade and the Ontario Tobacco Survey  which collected data from 2005 to 2011.

The COMPASS survey, managed through the University of Waterloo, is an ongoing longitudinal survey of school children across Canada.

Saturday, 9 May 2020

Nova Scotia and Ontario move to curb high-nicotine vaping products

While the world and public health systems have been gripped with managing COVID-19, a number of regulatory changes have nonetheless been put in place with respect to vaping products.

This post provides an update on some noteworthy Canadian policy decisions in 2020.

Dialing down the nicotine:

Last Tuesday, Nova Scotia adopted regulations "to add restrictions respecting nicotine potency ... effective on and after September 1, 2020". It is believed that the limit set will be 20 mg/ml. Nova Scotia is the first province to adopt this ceiling.

On April 28, Ontario formalized regulations which will allow only specialty vape shops to sell vaping products that have higher nicotine levels than 20mg/ml. This will come into force on July 1.

Addressing flavours, access and price:


The regulations adopted by Ontario in late April will restrict the types of flavours that can be sold in stores other than specialty vape shop.  Convenience stores and other locations will only be able to sell tobacco, menthol and mint frlavours. This will come into force on July 1.

On April 1st, Nova Scotia became the first Canadian province to ban the sale of flavoured vaping products. Prince Edward Island has proposed draft regulations to similarly restrict flavours, for which notification was given to the World Trade Organization.

On March 1st, Prince Edward Island banned the sale of vaping products in stores other than specialty vape shops, and set the legal age for sale at 21 years.

On January 1st, British Columbia became the first province to put a specific tax on vaping products Nova Scotia's Budget promised a vaping tax to take effect on September 15. Alberta's Budget promised a 20% tax on vaping products, but did not set an implementation date.

Other provincial governments and Health Canada have indicated that they intend to strengthen other regulations on the way these products made and sold. In March, Minister Hajdu told Parliament that "nicotine concentration and flavours are two of the areas where we believe we need to take stronger and quicker action."

A brief summary of these Canadian restrictions (and the graph below) are available on a fact sheet downloadable here. A chronology of regulatory developments on e-cigarettes in Canada and elsewhere can be accessed here



Monday, 4 May 2020

New vaping promotions expose challenges to regulators.

Over the past couple of weeks, BAT (owner of Nicoventures and Imperial Tobacco Canada) has launched new promotions in Canada for its vaping products. This campaign is part of a global re-branding initiative the company shared with investors in March.

This campaign can be seen as a test run of the federal government's plans for stricter rules on vaping promotions (announced in December). While seemingly following these new rules, BAT has nonethless been able to make vaping look fun, easy, not dangerous - and eminently 'tryable'.

This post looks at how this campaign exposes some of the challenges in our current constraints on nicotine marketing.

1: The companies have plenty of creative space to make their brands look sexy and cool.
The federal law on vaping and tobacco advertising takes a different approach with respect to vaping and tobacco advertising restrictions. For tobacco, all promotions are banned except those which are specifically permitted. For vaping, all promotions are allowed except those which are specifically banned.

This law prohibits "lifestyle advertising" for vaping products (s. 30.2), and defines a lifestyle ad as one which "associates a product with, or evokes a positive or negative emotion about or image of, a way of life such as one that includes glamour, recreation, excitement, vitality, risk or daring." The narrowness of the definition is rooted in a 2007 ruling of the Supreme Court.

Despite this prohibition, last year the social media pages run by BAT in Canada were laden with lifestyle imagery, like those from 2018 shown below. This drew complaints (including our own) as well as enforcement action by Health Canada.

Once Health Canada told them to remove the lifestyle influencer ads, BAT replaced them with more static images linked to product attributes like flavours and design. As the current ads from 2019-2020 shown below demonstrate, the company continues to make vaping products look exciting and glamourous -- but not in a way that is considered by enforcement officials to go against federal law.


Vype-Vuse Canada Instagram Feed 2018





Vype-Vuse Canada Instagram Feed 2019-20.

  

Vype-Vuse video promotions - 2018 and 2020 (click to play)


2: Domestic regulation is ineffective when global social media is exempted
Government authorities have been clamping down on influencers and other social media promotions, but the industry has shown little respect for national-level regulation.

The United Kingdom advertising authority, for example, told BAT last December to stop using Instagram in ways that general audiences could access them. Health Canada sent Imperial Tobacco warning letters regarding the content on its social media accounts.

BAT's response? To set up Instagram accounts in other countries and to provide links to these sites in its domestic posts.

The most recent Instagram and Facebook posts of Vype Canada are shown below. These are informational ads -- but the hashtags within them immediately lead viewers to promotions that provide, let us say, a very different type of promotion. Note the first reference on both pages to #vusechargebeyond (which we highlighted in yellow). This term was trademarked by BAT in Canada last October.

Through its global presence, BAT manages dozens of Instagram, Facebook, Twitter, and Youtube accounts. Some of these are linked to countries (e.g. , Vypeitalia), others are stateless (e.g. vype_worldwide). The national accounts become gateways to global promotions which flaut domestic regulations.

For example, social media streams link Canadians to promotions that are banned in Canada, such as sponsored virtual concerts, race cars, and fashion.

Canadian law is poorly structured to take action against these promotions. Even though the federal law was drafted in 2017, it makes no provision for social media. The decision of previous decades to take no action against imported magazines and broadcasts has been applied to socoial media. (TVPA, s. 31). Individuals or companies based in Canada are not allowed to use that exemption -- but as long as the campaigns are run by multinational headquarters, these promotions benefit from this statutory carve-out.

Last year Instagram and Facebook's pledged to stop paid influencers promoting vaping products. BAT seems to have found a way to #chargebeyond that barrier.

Imperial Tobacco's social media pages direct viewers to trans-border advertising.

Govypeca Instagram refers viewers to #vusechargebeyond:


Vype Canada Instagram May 2020
showing link (highlighted) 
to #vusechargebeyond



#vusechargebeyond Instagram May 2020



Vypeca Facebook refers viewers to #vusechargebeyond:


Vype Canada Instagram May 2020
showing link (highlighted) 
to #vusechargebeyond

#vusechargebeyond Facebook May 2020



3: Product and packaging are used as advertising platforms
This winter plain and standardized packaging became a requirement for tobacco products sold in Canada, as plain packaging had been required for cannabis products since 2018. Soon, cigarettes will also be required to have a standardized appearance.

The federal labelling requirements for Vaping products were finalized in December and come into force on July 1. These new rules require companies to increases the size of the warnings and standardize the appearance of the nicotine concentration, as BAT has done in its new Vype-Vuse packages. They do not, however, prevent the company from using other design elements to dilute the impact of these new requirements. Their new packages, shown below, demonstrate how they have chosen to do this.

The devices themselves are increasingly decorated and image-laden, as shown below. Again, the rationale for not allowing harmful products to be enticingly designed has not been transferred to vaping devices.


Vype capsule package 2019


Vype-Vuse capsule package, 2020


Vype-Vuse decorative 'skins' - May 2020


Japan Tobacco "Crystal" Logic  May 2020



4: Candy-coated addiction can be advertised, as long as it isn't called candy
Canada's federal lawprohibits vaping products from being promoted in ways that make consumers think that they taste like candy, soft drinks, cannabis or deserts. This is why you won't find flavours like Tiramisu sold in Canada, although it is sold by BAT in other countries.

The law does not prevent vaping products from tasting like confectionery, as long as it is not promoted in that way. Nor are companies prohbited from using flavour descriptions that make the product seem as attractive as candy or deserts: promoting Creme-brulée flavoured vape is forbidden but promoting "Smooth vanilla with soft notes of cinammon" is okay.

The use of evocative flavour descritions was recently reviewed by the U.K. advertising authority, which found that Vype flavour descriptions "went further than simple factual claims and constituted descriptive, promotional language". It ordered BAT to tone down its flavour descriptions.

BAT markets Vype-Vuse flavours in Canada with descriptive, promotional language:

"explosion alive with almond notes"
"zesty, lively combination"
"deepy yet light blend of..."
"collision of cucumber freshness with an element of tanginess"
"Expertly crafted refreshing mint"
"soft notes of"





5: E-stores are excessively promotional
In 2002, Saskatchewan became the first Canadian province to ban the display of tobacco products, a measure which has been extended to the display of vaping products in all but one province (Alberta). Specialty vape shops are generally exempt from these requirements, as long as young people are not permitted in the store.

Increasingly, the preferred route to market for big nicotine companies are their own e-commerce sites and their own retail outlets - as BAT has acknowledged to its investors. (E-commerce is not allowed in Quebec, and the the companies do not accept orders from Nova Scotia, where flavours are banned).

These sites work on the honour system with respect to youth access, requesting visitors to self-identify their age. Although the federal government proposes to require meaningful age-gating, this is not currently in place.

In Canada, these sites are highly designed, rich in colour, movement and sound. The products are displayed in a showroom context -- with special effects and dramatic backdrops. This is in contrast to a few other countries -- notably Belgium -- where web-sites are staid and products cannot be shown. The contrast between BAT's e-commerce websites in Canada and Belgium is shown below.


Canada - govype.ca - May 4, 2020




Belgium - govype.com/be/be - May 4, 2020

Monday, 27 April 2020

Test your tobacco control knowledge!

How well have you been following tobacco control events in Canada? Take 10 minutes to test your knowledge of recent events.

Bragging rights are a short quiz away!....(and yes, there are some trick questions).

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1. In March 2020, British American Tobacco changed its logo.
What slogan did it adopt?

a) We've come a long way, baby
b) Accelerating Delivery
c) A better tomorrow
d) I'd rather switch than fight
e) A taste you can call your own

2) The federal government recently made public its tax revenues from tobacco sales in 2018-2019 and its budget for tobacco control for 2020-2021.
Which of the following statements are true?

a) For every $1 in federal tobacco tax revenue, 1 cent will be spent on tobacco control.
b) For every Canadian smoker, the federal government will spend less than $10 per year on tobacco control.
c) The average Canadian smokers pays about $700 per year in federal tobacco taxes.
d) Federal Government revenues from tobacco sales are increasing faster than industry revenues.

3) In January the Council of Chief Medical Officers of Health recommended that governments adopt several measures to prevent youth vaping.
Which of the following did they not recommend?

a) ban all flavoured vaping products and then provide regulatory exemptiosn for a minimum sets of flavours.
b) limit nicotine levels in vaping products to a maximum of 20 mg/ml.
c) tax vaping products in a manner consistent with maximizing youth protection while providing some degree of preferential pricing.
d) promote e-cigarettes as a form of harm reduction.
e) increase the minimum age for tobacco and vaping to 21 years.

4) In December the results of the Canadian Student Tobacco Alcohol and Drug Survey were released. In only one province the rate of youth vaping had not doubled over the past 4 years.
Which province was that?


5) Plain packaging of tobacco products came fully into effect in Canada in February 2020.
Which of the following countries has not yet implemented plain packaging? (A bonus point to identify those countries which require plain packaging of e-cigarettes).

a) Turkey
b) Uruguay
c) Saudi Arabia
d) Israel
e) Singapore

6) At least 40 countries do not permit the sale of electronic cigarettes as consumer products.
Which of the following statements is not true?

a) These countries represent about one-third of the world's population.
b) Among these countries are several with advanced tobacco control strategies, including one-third of the countries which have passed plain-packaging regulations for tobacco.
c) These countries are found in each of the World Health Organization's 6 regions.
d) These countries include member states of the European Union.

7) Which of the following trademarks were not recently registered by a tobacco company in Canada?
a) World of White
b) Cool Flow
c) Press and Roll
d) Voke
e) True me

8) How many Canadian provinces have implemented a tax on vaping products?

9) The Lung Association and Heart and Stroke are sponsoring PSA to encourage governments to protect kids from vaping.
What products do they use to make their point? (no peeking!)

a) Pokemon
b) Lego
c) Ice-cream
d) My little pony
e) Fidget spinners

10) Which of the following are cities in Canada not authorized to regulate?
a) minimum prices on cigarettes
b) flavourings in vaping products
c) minimum separation distances between tobacco retailers
d) moratorium on new licenses to sell tobacco or vaping products
e) a regulatory fee to pay for cleaning up filters and e-cigarette waste

11) Which of the following countries do not allow retailers to set their own prices for tobacco products?
a) China
b) Brazil
c) France
e) Japan
e) Sweden

12) The number of tobacco retailers has fallen in Canada by how much since 2000?
a) 10%
b) 15%
c) 20%
d) 25%
e) 30%

13) Which of the following statements are not true?
a) For every post office outlet, Canadians have access to 4 tobacco retailers.
b) Canada has more tobacco retailers per capita than the United States.
c) Canada has more tobacco retailers per capita than France.
d) Canada has more than twice as many tobacco retailers as it has gas stations.

14). British American Tobacco announced that around the world it was changing the brand name of its e-cigarettes from VYPE to VUSE (the name which previously was used only in the United States).
Why did they do this?


15) Canadian provinces are currently in the 7th month of mediation talks with tobacco companies to settle the lawsuits filed by provinces over the past 2 decades.
Which of the following is not true
?

a) the provinces have claimed in excess of $600 billion in health care costs related to the companies' wrongful actions.
b) neither the Canadian companies nor their foreign owners has put money aside to cover the payments they may be required to make as a result of lawsuits.
c) the lawyers representing most of the provinces are working on a contingency basis, with agreements that will pay them up to 30% of any settlement amounts.
d) the provinces have sought advice from the health and medical communities on how to use the lawsuits to reduce smoking.

BONUS Question

16) Why did we circulate this quiz?

Answers 
  1. c) A better tomorrow. Accelerating Delivery was a slogan used by BAT in recent years, the others are advertising slogans for cigarettes.
  2. All but d) are true.
  3. d) The council made no reference to harm reduction.
  4. There was no increase noticed in New Brunswick because the survey was not previously conducted in that province.
  5. e) Singapore's regulations do not come into effect until July 2020, when it will be the 14th country to have put this in place. Israel has required plain packaging of e-cigarettes since January 2020.
  6. d) EU members are required to permit the sale of e-cigarettes.
  7. d) VOKE. That trademark was abandoned by tobacco company BAT, and has been picked up by Kind Consumer.
  8. a) Only British Columbia has implemented a tax on vaping products. Nova Scotia will implement its tax in September 2020. Alberta has said it will impose a tax, but has not yet set a date.
  9. c) Ice-cream. The campaign is called "Get the scoop".
  10. Cities have the power to impose all these regulations. 
  11. Japan, Brazil and France restrict retail competition for cigarettes by establishing the price which retailers must charge for each brand.
  12. e) In 2000, there were approximately 40,000 tobacco retailers in Canada, compared with 28,000 in 2018 - a 30% reduction
  13. B is not true. In the USA there are about 115 tobacco retailers for 100,000 people, compared with 71 in Canada.
  14. We don't know either. Give yourself a point. 
  15. d) Despite requests for meetings, none of the provinces has agreed to or initiated public consultations on resolving these lawsuits. 
  16. To encourage you to take note of our recently-released information products, linked below.
Score

However you scored, give yourself perfect marks for caring enough to try. 

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Information on these and other current topics in tobacco can be found in our newly-released documents:


Wednesday, 22 April 2020

Calculating the profits of tobacco companies in Canada

How much do tobacco companies make in Canada? 

Answering that question became more difficult about a decade ago, after all three of the traditional tobacco companies (BAT-Imperial Tobaco Canada, PMI-Rothmans, Benson and Hedges, and JTI-Macdonald) became fully-owned subsidiaries of multinationals and the fourth (Grand River Enterprises) remained a privately held operation.

Over the past year, however, data on the earnings of some of these companies has become available from a number of sources. Using the data sources detailed below, we can now estimate that:
  • The gross revenue from cigarette sales of all tobacco companies (including Grand River Enterprises) was more than $4 billion in 2019. 
  • Including estimates for excise taxes ($7 billion +) and retail mark-up (10%), Canadians likely spent in excess of $13 billion on cigarettes in 2019. 
  • The gross revenue from all tobacco sales of the three major tobacco companies was around $3.4 billion in 2019. 
  • From this, the 3 major companies cleared about $1.36 billion in 2019.
  • The estimated average profit per cigarette was over $0.05 cents, or more than $1 per package. 

Data sources:

Mandatory reports to Health Canada:

Tobacco companies are required to make periodic reports to Health Canada, including monthly data on the amount of each brand and type of tobacco they sell and "the Canadian dollar value of sales, including the excise duty." All companies legally operating in Canada are required to make these reports, including Grand River Entperprises, operating from Mohawk lands.

In the data released in the early new year, Health Canada identified that gross sales revenue (exclusive of excise tax and operating costs) on sales of 23.9 billion cigarettes was $4.19 billion (gross revenue of $0.18 per cigarette). This average would include all companies and all sales, including exports and duty-free.



In previous years, Health Canada has identified that cigarette sales represent about 94% of the value of the tobacco market, and that the three major companies receive 91% of the sales. 

Reports to investors:

It has been many years since tobacco companies routinely provided investors with financial data about their Canadian operations. (See historic note below.)

Yesterday, however, Philip Morris International reported on 12 weeks of sales in 2019. For the period before it "deconsolidated" its Canadian operation on March 22, 2019, it sold 1 billion cigarettes in Canada that were trademarked to Rothmans, Benson and Hedges in Canada, and declared operating revenues were USD 181 million (equivalent to CAD $250 million).
  • PMI defines net revenues as "operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives and excise taxes."  
  • PMI retains the trademark for some of the brands sold by RBH in Canada, including the high-selling discount brands Next and Philip Morris 



Information from lawsuits:

Some financial information was released during the class action trial whose ruling precipitated the CCAA actions. In 2015 ruling Justice Riordan disclosed some information from financial records the companies had insisted remain confidential:  [1071]  For ITL, the five-year average of before-tax earnings between 2009 and 2013 is $483,000,000.  For RBH, it is $460,000,000.  JTM's "Earnings from operations" for the period average $103,000,000.  The Quebec Court of Appeal later made public annual reports for 2013 and 2014 for Rothmans, Benson and Hedges and Imperial Tobacco Canada. 

Filings in the CCAA Proceedings:

For over a year now, the three largest tobacco companies operating in Canada have been operating under the provisions of the federal Companies' Creditors Arrangement Act. This unusual circumstance was triggered when the Quebec Court of Appeal upheld a lower court ruling against the companies, ordering them to pay several billions of dollars to Quebec smokers whose cancers and lung disease could be attributed to the companies' wrongful actions in previous years.

The CCAA process has effectively stopped the clock on all the lawsuits against the companies, while they attempt to arrive at a settlement with all of the provinces, class actions and others suing them. One of the requirements imposed on the companies for the privilege of this ceasefire is a requirement to stop sending their earnings to their parent companies and to reveal their financial picture each time they ask the court for an extension to the stay.

This information was provided for 45 weeks of operation 2019 and can be found in a series of Monitor's reports for each company (listed below). Each accounting firm uses somewhat different categories to state income and expenses, in ways that impede consolidating the data.

Links to data sources


Imperial Tobacco Canada Ltd.

2019 to 2013 reference to earnings in Justice Riordan's ruling - 2015 QCCS 2382 (para 1071)
2014 earnings statement: Blais Létourneau appeal document 
2017 and 2018 earnings statement. Application record. (page 688) 
3 week period ending April 14. Monitor's Second Report (page 14)
8 weeks ending June 9, 2019. Monitor's Fourth Report (page 6)
14 weeks ending September 15, 2019. Monitor's Fifth Report (page 7)
20 weeks ending February 2, 2020. Monitor's Seventh Report (page 8)

Rothmans, Benson and Hedges

2009 to 2013 reference to earnings in Justice Riordan's ruling - 2015 QCCS 2382 (para 1071)
2014 earnings statement: Blais Létourneau appeal document
2018 earnings statement.  Application Record (page 80)
12.5 weeks ending June 9, 2019. Monitor's Second Report (page 20)
14 weeks ending Setpember 15, 2019. Monitor's Third Report (page 14)
20 weeks ending February 2, 2020. Monitor's Fifth Report (page 12)

JTI-Macdonald

2019 to 2013 reference to earnings in Justice Riordan's ruling - 2015 QCCS 2382 (para 1071)
2017 earnings statement. Application Record (page 141 and 211)
12 week period ending June 14, 2019. Monitor's Fourth Report (page 10)
13 week period ending September 13, 2019. Monitor's Fifth Report (page 13)
20 week period ending January 31, 2020. Monitor's Seventh Report (page 11)

Historic note:


For decades, two of the companies (Imperial Tobacco Canada Ltd and Rothmans, Benson and Hedges) were components of Canadian publicly-traded corporations (Imasco and Rothmans Inc). As such, they submtited annual reports and other documents with stock-market authorities. After they became fully-owned subisidaries (Imperial Tobacco acquired by British American Tobacco in 2000 and Rothmans Benson and Hedges acquired by Philip Morris International in 2008), these reports were no longer required. The records, however, remain available on the SEDAR website (Rothmans Inc and Imperial Tobacco).  The third-largest company, now JTI-Macdonald, was never publicly traded. It was a private company owned by the Stewart family until 1974, when it was sold to Reynolds and subsequently re-sold to Gallaher and then Japan Tobacco. Through all those structures, the revenues and profits of that company have rarely been disclosed.

Monday, 20 April 2020

E-cigarette taxes: A global snapshot

Earlier this month, we reported on taxes on cigarettes in Canada, and also on heat-not-burn tobacco sticks.* This post reviews Canadian tax measures on e-cigarettes (vaping products), and compares with those in other jurisdictions.





Vaping taxes in Canada:
Currently, the federal government does not impose taxes on e-cigarettes, other than the GST at the rate imposed on all consumer goods.

Three Canadian provinces have indicated that they intend to set tax rates for vaping products which are higher than for other goods. One of these taxes is already in place:

Vaping taxes in the United States:
23 U.S states apply taxes to electronic cigarette devices or the nicotine liquids that are used with them, as do a small number of municipalities. A number of approaches have been adopted. Some impose a tax on the value of the product (ad valorem tax), ranging from 15% (Illinois) to 95% (Minnesota and Washington DC). Others impose a tax on the amount of vaping liquid sold (specific tax), ranging from $0.05 per ml to $1.20 per ml (Chicago). Some jurisdictions blend both tax approaches. A table showing tax rates is available here. 

Vaping taxes in other countries:
More than two dozen countries impose taxes on e-cigarettes, although in some cases the tax rate is set low or even at zero. A list of countries, and the rates charged, is available here. 

Some innovative approaches are among these examples. Two countries (Croatia and Kazakhstan) apply a zero rate tax. This does not produce any revenues, but it does provide government with information on the market size and growth. South Korea applies four types of taxes on e-cigarette products, including a tax directed to support health promotion activities and to address the costs of disposing the waste from the products.

The rationale for e-cigarette taxes:
A year has passed since the World Bank published its review on E-cigarettes: Use and Taxation, in which it reviewed the evidence and noted the "challenging" environment for e-cigarette tax policy. Since this review, additional research has also become available:
Resources and additional reading:

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* The information on heat-not-burn taxes has been corrected. British Columbia has delayed changing its tax on these products as a result of COVID-19. The legislation authorizing those changes was not passed by the legislature at the time the tax was due to come into effect (April 1).