Are we prepared for an e-cigarette price war?

CNBC reported today that the price war among vaping companies in the United States is driving the cost of experimenting with nicotine to below the cost of a candy bar. Some starter kits can be bought for as little as US$0.99. 

"Late last year, NJOY started selling its Ace e-cigarettes for 99 cents in stores, compared with the $7.99 it currently charges online." (Pictured below is one such offer from a US web-retailer).

The price war among vaping companies in Canada as not yet hit that level, although, as reported here earlier this summer, it has resulted in the price of  major vaping devices being cut in half in only 6 months. Thankfully they are not (at least yet!) at the levels observed in the USA.

It  could be only a matter of time before the companies launch a full-scale price war in Canada. If so, there is little sign that governments will be able to prevent young people from becoming collateral damage.

What could they be doing?  I'm glad you asked.

* Health ministries could prepare to amend tobacco and vaping laws in order to give themselves regulatory authority over promotional prices. Many of these laws already have some form of restraint on using price to induce young users -- measures like minimum package sizes and bans on certain discounts. But for the most part, price promotions for tobacco products (including vaping) are currently exempted. Filling this loop hole is more important than ever.

* the federal department of Innovation, Science and Economic Development (formerly Industry Canada) could prepare to undo the damage it imposed in 2009, when it  amended the Competition Act in the infamous omnibus budget bill of 2009. Before then, manufacturers could not set discriminatory wholesale prices between retailers. By re-inserting restrictions on wholesale price discounting for harmful products like tobacco and nicotine, this department could end the localized pricing practices that are undermining tobacco tax policies and stop them from expanding into nicotine.

* finance ministries can be exploring optimum tax policies for e-cigarettes. The World Bank has scoped out the use of taxes to discourage young people from vaping, and several U.S. states and other countries have already put e-cigarette taxes into effect. (Pictured below is the impact that US state-level taxes would have on a package of cartridge in Canada).

The importance of tax and price policies to reduce tobacco use has been recognized for several decades- and is a cornerstone of the Framework Convention on Tobacco Control. 

How many more children need to be addicted before this tool is taken out of the shed?

Monetizing peer pressure: JUUL joins in.

Some months ago, I received an e-mail from the Canadian marketers of Philip Morris' IQOS offering me the opportunity to earn $75 by putting them in touch with one of my friends who was willing to buy one of their products. "Each referred friend who meets an IQOS expert will receive $25", they promised and "For every friend who purchases IQOS, you will receive $75."

This, I believe, was a departure in tobacco marketing in Canada. I could not recall a previous time when tobacco companies recruited such a direct and sales-focused type of 'paid influencer'.

One might have thought that this practice was banned by Canadian tobacco law, which has for many years told manufacturers that they can't offer prizes, money or other inducements to purchase tobacco products. (IQOS and other heat-not-burn devices are considered tobacco products under federal law).

The ban was recently reaffirmed when the federal Tobacco and Vaping Products Act was overhauled in 2018:

29 No manufacturer or retailer shall
(a) provide or offer to provide any consideration, for the purchase of a tobacco product, including a gift to a purchaser or a third party, bonus, premium, cash rebate or right to participate in a game, draw, lottery or contest...

Six months have passed since Physicians for a Smoke-Free Canada filed a complaint to Health Canada about the IQOS referral offer yet the IQOS referral web-site is still active (referiqos.com).

Which brings us to JUUL.

Yesterday, JUUL presented me with a similar, if somewhat less lucrative, offer. As the e-mail presented the offer, every referred adult smoker who makes a purchase gets a discount of $20 on their account, with a similar credit given to the person who referred them.

The federal law sets different rules for vaping promotions than it does for tobacco. You are allowed to offer cash or other 'considerations' -- but only in a physical store ("retail establishment") to which young persons do not have access.

30.6 (1) No manufacturer or retailer shall, in a place to which young persons have access,
(a) offer to provide any consideration, for the purchase of a vaping product, including a gift to a purchaser or a third party, bonus, premium, cash rebate or right to participate in a game, draw, lottery or contest; or
(b) offer to furnish a vaping product in consideration of the purchase of a product or service or the performance of a service.

(2) No manufacturer or retailer shall, in a place other than a retail establishment where vaping products are ordinarily sold,
(a) provide any consideration, for the purchase of a vaping product, including a gift to a purchaser or a third party, bonus, premium, cash rebate or right to participate in a game, draw, lottery or contest; or
(b) furnish a vaping product in consideration of the purchase of a product or service or the performance of a service.

Influence peddling

Tobacco companies have long known that peer pressure is a driving force for uptake of nicotine. Imperial Tobacco Canada (BAT) infamously studied the role that peer pressure played in teenagers - its Project 16 report found "there is no doubt that peer group influence is the single most important factor in the decision by an adolescent to smoke."  

New communications technologies now allow the companies to harness the power of peer pressure -- and the law seems unable to prevent it from happening.

Everything new is old again

For a century, tobacco companies have pioneered marketing strategies and pushed the envelope of marketing codes and legal restrictions. For decades, governments have been caught flat footed, unable to keep up with, let alone control, the inventiveness and deep pockets of marketers. The difference now is that we know the consequences of regulatory inaction.

If paying people to encourage their friends to use use of addictive and harmful products is permitted under the federal TVPA, then a new law is needed.

Imperial Tobacco is encouraging you to pimp your vape

On July, Imperial Tobacco posted an ad on its Instagram account, announcing that "ePod Skin Collections are coming soon. Stay tuned! Happy Canada Day!" 

Sure enough, later last month the company put on offer 19 different sleeves that can be used to dress up a vaping device. They are pretty spiff, and are sold under evocative descriptors like "maze", "tropico", "relief", and "express". The skins can be ordered from the company'  web-site for about $4 each.

When decorative covers were first sold by British American Tobacco for the ePen 3 in the United Kingdom, they were launched as "high fashion pieces" commissioned by clothing designer Henry Holland. His aim was to help consumers incorporate things in their lives that gave them "positivity", "empowerment" and helped them "feel really good about themselves."

Res ipsa loquitur

Linking addictive nicotine to a fashion lifestyle is likely not permitted under Canada's federal Tobacco and Vaping Products Act (s. 30.2), which may be why there was no similarly splashy launch to sale of these fashion accessories in Canada.

The Tobacco and Vaping Products Act says that "30.2 No person shall promote a vaping product, a vaping product-related brand element or a thing that displays a vaping product-related brand element by means of lifestyle advertising."

Health Canada recently finalized regulations to put cigarettes in plain packaging. One of the reasons for doing so was that branded packages functioned as 'mini-billboards', encouraging young people to try smoking.

By the same logic, these fancy-dress sleeves will serve as mini-billboards for vaping products -- a consumer-carried lifestyle advertisements.

Only in Canada, you say?  Pity.

The skins are not yet listed for sale in the few other countries where the epod is marketed, eg France, Germany and the United Kingdom.

Visualizing the gains since 2000

I spent my coffee break this morning playing with the *awesome* visualization tools made available courtesy of ourworldindata.org based on data provided by the World Health Organization.

Enormous strides have been made over the past decade in standardizing health indicators and in making data available for analysis in ways previously unimaginable. Our thanks to those who have invested in this important work.

For reasons never made clear, Canadian health authorities have rarely age-standardized smoking rates. Most people start smoking when they are young and a proportion of them quit as they age - so it doesn't make sense to compare the smoking rates of a relatively young population (say Africa or Canada in the 1960s) with those of a relatively old population (say Japan or Canada in 2017!).

Because WHO age standardizes smoking rates in its Global Health Observatory repository, we can compare Canada's progress with other countries with a little more confidence.

The charts below suggest that:

• wealthy countries with modest anti-smoking programs (France and Germany) have made little progress in reducing current smoking (daily and occasional) among men or women
• wealthy countries with more active anti-smoking strategies and liberalized markets for harm-reduction/tobacco alternatives (United Kingdom, United States, Sweden), have made more progress against smoking
• wealthy countries with more active smoking strategies and restricted markets for harm-reduction/tobacco alternatives (Canada  until 2016, Australia) have made similar progress. 
• developing countries with more active smoking strategies and restricted markets for tobacco alternatives (Thailand, Brazil) have similarly made progress.

Data is more plentiful, more accurate and more usable -- but it still isn't enough to make a prima facie case that liberalized nicotine markets drive down current smoking. More analysis needed!

Big Data for Big Nicotine - Insights from the trademark registration for the JUUL C1

Yesterday, word went round that JUUL had opened a flagship store in Canada's flagship city. And to mark the opening of the store on Toronto's Queen Street West, the controversial vaping company launched a pilot program for its new "C1" device.  

The JUUL C1 differs from the current ubiquitous model in that it is equipped with bluetooth capacity, and is intended to be used in conjunction with a mobile app. Visitors to the store or JUUL's Canadian web-site (or the U.K. site where the C1 is also being sold) would have every reason to think that this has been done for their benefit:

How can the JUUL app benefit me?
The JUUL app, currently a pilot, is designed to help users manage their nicotine consumption and combat unauthorized use. The app provides connected features such as:

• Usage Monitor, gain greater control and visibility of your usage. Real-time monitoring with daily, weekly, and monthly tracking of your puff use.
• Device Lock, JUUL C1 features automatic device security. You can manually lock the device, or set it to Auto-Lock to prevent unauthorized use when your JUUL C1 is not being used by you.
• JUUL Locator, keep track of your JUUL C1. When in range, ring it to play a sound. When out of range, see where it was last paired to your phone to help you stay on your switching journey.

Missing from this sales-pitch, and from the Google Play store is information on how the mobile app connected to the vaping device can help JUUL monitor the consumer behaviour of nicotine users.

For this information, a more helpful source is the trade-mark database managed by Industry Canada.  Not quite 2 weeks ago (on July 22), JUUL filed its description of goods that would be sold under the JUUL C1 label. (Trademark registration 1976819). In addition to the location and blocking functions, the C1 also seems designed to monitor and report on the movements and communications of vapers. 

In their own words, JUUL C1 covers a host of other data-collection functions: 

"computer software for use in posting, transmitting, retrieving, receiving, reviewing, organizing, searching and managing text, audio, visual and multimedia data and content via computers, mobile phones, wired and wireless communication devices, and optical and electronic communications networks; computer software for calculating, mapping, transmitting and reporting information relating to the location, movement, proximity, departure and arrival of individuals and objects via computers, mobile phones, wired and wireless communication devices, and optical and electronic communications networks."

Juul is not the first company to include surveillance mechanisms in its device. Reuters commissioned a teardown of the bluetooth function of IQOS, and reported last year that the technology would allow the company to gather data from unwitting users.

In the era of digital marketing and Big Data, this type of consumer research can't be considered a surprising development. But shocking, nonetheless!.

Vive la France! Vive la France mobilisée!

Earlier this summer, the French government continued with one really good idea:  getting French communities to work together to combat addiction, and giving them the money needed to do so effecxtively.

The announcement was made in the form of a second request for proposals on the web-site of the French Ministry of Solidarity and Health (even in French the title is catchy -- "Ministère des Solidarités et de la Santé".  Civil society organizations, academics, health professionals and other non-commercial interests are invited to apply for funding.

A similar RFP was issued last year for mobilization projects focused on tobacco, with a budget of 5 million euros. The "Fonds de lutte de tabac" as it was then known, allocated more than 90 million euros to other tobacco-related program costs.

The Ministry's objectives for civil society activities, as translated, are pasted below. They include exposing the marketing practices of tobacco, alcohol and cannabis industries, and denormalizing the use of these addictive products. Applications can be submitted up to September 16, 2019.

The best part? French tax payers are not footing the bill for this work. Since 2017, the "Fonds de lutte" has been financed by a special tax on the tobacco industry.

Extract from the Ministry of Solidarity and Health

Call for proposals: Mobilizing Civil Society against addiction

As part of the fund for the fight against addiction, a call for projects is launched to support actions of a national nature carried out by civil society actors . It is open until September 16, 2019 .

The objective is to support national projects that aim to:

• improve information and understanding, especially of the general population or specific audiences, elected officials and opinion leaders, on the impact and dangers of the use of psychoactive substances (in particular tobacco, alcohol and cannabis) and the benefits of stopping or reducing consumption;
• deconstruct the marketing and marketing strategies of the tobacco, alcohol and / or cannabis industries;
• promote the denormalization of tobacco, alcohol and cannabis in society, especially among young people;
• promote the involvement of users or former users themselves (young people, peer helpers or expert patients, pregnant women, etc.), especially in stop-smoking, risk-reduction and / or advocacy projects;
• equip and support the practices of health professionals and the socio-educational sector in the prevention of risky consumption of psychoactive substances or risk reduction.

This call for projects is aimed at associations, groups of associations working in the fields of the fight against tobacco and addictive behaviors, prevention and health promotion, the fight against precariousness, Patients, users and consumers associations, learned societies and health professionals.

Project promoters must be non-profit and have no link with the tobacco industry (Article 5.3 of the World Health Organization Framework Convention on Tobacco Control) or supply chain operators alcohol or cannabis.

Cheaper. Higher nicotine. BAT's strategy for the Canadian vaping market.

A poster on the door of a convenience store caught my eye last week. On the corner of Parkdale and Scott Street in Ottawa BAT's Vype ePod starter kit was being promoted at $10.99. In this neighbourhood, it is now cheaper to to buy nicotine than lunch.

BAT has made big cuts to the price of its VYPE products in Canada. When the ePod was first available in Ottawa in January, the price was over $40, The ePen 3, introduced late last summer, was priced at a more modest $25.

But the price cuts are deeper in some stores than in others. This Quickie store might sell the ePod for $10.99, but in most other outlets and on the official on-line distributor, the price is consistently set at $19.99.

Neighbourhood-level price controls

Deep discounting at this one store is no random event, nor is it a retail promotion beyond the control of BAT. To the contrary, the imagery, warning and other design elements of the price sign make clear that this was executed by the Vype marketing team. This is an official sign using licensed design.

Nor should it be a surprise. BAT/Imperial Tobacco Canada has pioneered localized wholesale pricing for cigarette products. Since the federal government made doing so legal in 2009, this company has charged different wholesale prices to different retailers, using contracts and incentives to control the amount of mark-up a retailer can add.

Sell global. Price local.

By comparing the price charged for Vype products on BAT's global on-line e-store (govype.com) and on its U.S. equivalent (vusevapor.com), a similarly dramatic difference in list price can be seen between countries. Prices are available for the ePen in 10 countries and for the ePod/Alto in 5. As shown below, the 'starter kits' for both products are cheaper in Canada than in most or all other countries. The same product is 50% more in France and the United Kingdom, and more than twice as expensive in Germany and the United States.

	Price		Nicotine concentration (mg/ml)
	ePen 3	ePod	ePen 3	ePod
Canada	$19.99	$19.99	0,6,12,18,30	18, 57
Colombia	$41.00		0, 6, 18
France	$14.75	$29.65	0,6,12,18	18
Germany	$37.18	$44.63	0,12,18	18
Guatamala	$33.83		0,6,18
Italy	$29.65		0,6,18
Kuwait	$38.79		6, 12,18
Mexico	$31.51		0,6,12,18
New Zealand	$35.06		12,18
United Kingdom	$30.05	$33.40	0,6,12,18	18
United States (Sold as ALTO)	Not available	$50.41		1.5%, 3%, 4.8%

 (Prices were converted to Canadian dollar equivalents at the exchange rate in effect on July 1).

The dose is the problem

Comparing the information on BAT's e-store reveals other differences that pose risks to Canadian youth. The vaping solutions sold by BAT for these products have much higher levels of nicotine in Canada than in all other countries other than the United States.

In the European Union, there is a regulatory limit of 20 mg/ml, but in other markets the nicotine level is set at BAT's discretion. A similar increase of nicotine levels in American markets has been linked to a nicotine arms race against JUUL.

One more tool available to protect youth from nicotine addiction

Although the use of tax to discourage young people from experimenting with tobacco products has long been established as a core public health strategy, there has been little discussion - so far - about using taxes to prevent ultra-low pricing on vaping products (or to prevent companies from giving them away

Health Canada has acknowledged that youth vaping is a problem and recently consulted with the public on regulatory options to address the problem (Reducing Youth Access and Appeal of Vaping Products: Potential Regulatory Measures). The consultation paper identifies that price is a main factor in the purchase decision of youth, but makes no recommendations for any public health interventions to address the impact of affordability on youth initiation.

Maybe it's time to give this additional tool more thought.

And with this particular price sign only a stone's throw from Health Canada's tobacco control office, perhaps this might happen!