Wednesday, 21 August 2019

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?


Tuesday, 13 August 2019

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.

Thursday, 8 August 2019

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 FranceGermany 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!




Wednesday, 31 July 2019

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!.

Tuesday, 30 July 2019

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.


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.

Thursday, 4 July 2019

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!

Thursday, 16 May 2019

It's time for Health Canada to clamp down on vaping ads

Almost a year has passed since the federal government opened the door for tobacco companies to begin to sell vaping products in Canada. (Until May 23, 2018 it was illegal to sell recreational nicotine devices in Canada).

It wasn't long before vaping among kids was recognized as a public health crisis. Principals took the doors off washrooms. Parents wrote letters to government. Public Health Units spoke with alarm.

What hasn't happened yet is a clamping down on the types of marketing that are driving the youth vaping epidemic. Health Canada has said that they want to put new regulations in place, but they won't have time to do so for another year or so. Groups like ours want the law to be strengthened to remove all advertising, but with an election around the corner and bills piled up in Parliament, this is not going to happen soon either.

So what is to be done? For a start, a stricter application of the current law would lessen the volume and the harmfulness of the ads that are now in circulation.

PSC has identified four important areas where the Tobacco and Vaping Products Act could be enforced, but is not. They are:

Youth appealing designs. 
Health Canada is not enforcing the ban on vaping devices whose design is appealing to young persons. (S. 30.41) Enforcing this restriction would remove from the market those products (like JUUL) which are driving the youth vaping epidemic.

Misleading advertising
Health Canada is not enforcing the ban on promotions which create a general impression that the products are less harmful than they are. (S 30.42(1-2). Echoing Supreme Court decisions on the need to protect inexperienced consumers, the Quebec Court of Appeal recently ruled that the absence of appropriately detailed and prominent health warnings on tobacco promotions is a form of misleading advertising. Enforcing this restriction would remove advertisements, brand activations and social media posts where warnings do not meet the standards established by court.

Lifestyle advertisements
Health Canada is not enforcing the ban on advertisements which communicate risk and daring, aspects which trigger the ban on ‘lifestyle advertisements’ in the law (ss 2 and  30.2). Current vaping products make direct and indirect appeals to the significant risks associated with nicotine use. A strong enforcement of the ban on lifestyle advertisements would remove most advertisements.

Testimonial advertisements in exchange for gifts or money
Health Canada is not enforcing the ban on the use of testimonials and endorsements in vaping advertisements. (S. 30.21(1). Vaping companies are engaging young people as brand activators, distributors and social influencers to promote vaping devices through face to face and on-line contact, often in exchange for gifts or money, a practice which is also contrary to the TVPS (s. 30.6). Enforcing these restrictions would protect young people from this commercialized peer pressure.

Want to know more?  Our backgrounder can be downloaded here!


Monday, 6 May 2019

The first one is free.... Imperial Tobacco gives away its addictive Vype product

To be polite, let's use the term 'ironic' to describe what took place in the same neighbourhood and at the same time that Imperial Tobacco was seeking court protection from having to compensate smokers for having misled them about the health effects of smoking in the 1950s through 1990s.

On Toronto's bustling Queen Street on April 25th -- only a few hundred metres from the University Avenue Courtroom where they were facing down the desire of the Ontario government to continue its suit against them --  Imperial Tobacco was seen clearly using the same fear-assuaging marketing playbook to market vaping devices as it had previously done with cigarettes. On this afternoon the door to its Vype van was wide open as the company invited passersby to enter, sign up and register to receive a free samples of its addictive nicotine vaping device.

Vype promotion truck
Queen Street near University Avenue
Thursday April 25, 2019
A "general impression" of fun? Yes

It would be hard, but not impossible, to miss the warnings on the door and side panel of the customized truck that was parked on the north side of Queen Street that day. But it would be equally hard to pay them much attention. From only a few feet away, the print was too small to read, and against the dramatic truck design there was little attention to spare. Besides, who has time to stop and read on Queen Street?

Far more inviting than the warnings was the open rear door of the truck and the steps that led inside.A group of twenty-somethings had created a cosy and convivial atmosphere. Everyone was waiting to sign up and receive a free starter kit of the Vype ePen3, including two of its new nicotine flavour cartridges. Unlike the previous flavoured nicotine pods marketed for this device, the ones being offered for free this day are made with the more powerful (and addictive) nicotine salts.

As I waited my turn, I had a chance to watch the two enthusiastic hosts behind a desk at the cab-end of the truck space. They carefully asked each visitor for proof of age, and noted the name and age of each in a log book. Dozens of pages of names had been recorded before mine was added to the list and I was invited to use an i-Pad to enter my name and mailing address.

The atmosphere in the truck was one of  laughter and camaraderie -- the two black men ahead of me got fist bumps and hugs as they left. Any comments I overheard about the vaping products being promoted were related to the flavours, colours and the time expected before delivery.

When my time came to talk with the hosts, I learned that they were hired as "brand ambassadors" and that their truck would be moving around Toronto for the next several weeks, giving away free Vype vaping devices as well as samples of two new flavours recently introduced for this device - both of them using nicotine 'salts'.

I did not ask about and they did not mention any risks (or benefits) of vaping nicotine. In response to my rambling questions about the differences between this product and the others I had heard about, like JUUL or the Vype e-pod, I got very little information but lots of big smiles.

A "general impression" of harm and addiction?  No.

The young men who invited me to receive my first free nicotine vaping device may have gone home thinking that their job complied with the law. They had, after all, made sure that everyone's age was verified. They had not made any health claims. They had were working in a truck that had a health warning, and sharing printed material that also contained a warning that the product "may be harmful to health" and that it contains "nicotine which is addictive."

But the experience of being invited to join the crowd in the truck and sign up for a free sample was like déja vu all over again - a blast to the 1970s past when cigarette companies put small warnings on the side of packages while they used promotions that discouraged consumers from thinking too hard if at all about the health risks.

The Quebec courts have now made clear that manufacturers must meet higher standards in their duty to warn. They have now established that advertising which is inconsistent with health warnings is a form of misleading advertising in the laws of that province. The responsibility of manufacturers to warn is summarized paragraph 227 of Justice Riordan's 2015 ruling. The Appeal Court confirmed these and, like Justice Riordan, established that lifestyle advertising was a form of misleading advertising, as it marketing practices that aimed to undermine knowledge of the risks was a form of misleading advertising as they conceal the harmful and toxic effects of the products. Even with health warnings, ads could be misleading, said the Appeal Court, if they do not counter the "general impression" that is left by the promotion that the products are less harmful than they are. This new standard of what the general impression to a credulous and inexperienced consumer is a test that has been set by the Supreme Court of Canada.

Among the many Canadian laws which prohibit deceptive advertising is the new federal Tobacco and Vaping Products Act, (TVPA) which bans promotions that are likely to give a general impression that is "erroneous" about the health effects or health hazards. (s. 30.42).

It is hard to see how Health Canada can fail to link these events, and shut this Vype promotion down as leaving an "erroneous" "general impression" about the likelihood of addiction and harm that would be received by the "credulous and inexperienced purchaser."

Brand ambassadors, testimonials and other 'considerations'.

But if that is not enough, there are other ways in which the Vype truck promotion likely runs afoul of other sections of the TVPA.

This law says that companies cannot give vaping products away in return for a service. (s. 30.6) Yet on this past Thursday, the devices were only given away in return for the service of registering in their data base. In a data-driven marketing economy, the provision of one's name and address can only be seen as a consideration.

The law prohibits the use of testimonials or endorsements -- "however communicated" (s. 30.21) It's hard to see the role of  brand ambassadors and social media influencers as anything but endorsements. The encouragement and physical contact given by these charming young men for people to enter their names into Imperial Tobacco's marketing data base in return for a free device was an endorsement communicated most personally,

A blind eye? 

There may be reason to hope that this promotion will not last long.

On April 21st, Health Canada officials shut down a different street promotion for Vype in Toronto.  On that occasion, a more permanent installation had been staffed by women attendants (in silver suits) for the Easter holiday weekend. According to news reports, the installation and material was seized by government inspectors on the basis that the promotion was "deemed to be in contravention of the prohibition on lifestyle advertising of vaping products and the prohibition on the use of testimonials and endorsements to promote vaping products.”


From CITY TV

Why Imperial Tobacco thought it could persist with brand activations (or whether Health Canada has told them they cannot) is not clear.

A late delivery

The free vaping device arrived this morning by Canada Post and after signing and showing proof of age, it is now mine to keep.


In comparison with the warning about the battery on the shipping label, the warning on the box seemed non-alarming. And there were no warnings at all on the device as it is meant to be used -- nor any on the "crisp mint" and "tobacco" flavoured pods.

The Vype brand activation team had told me that the delivery would be made within 2 to 3 business days. In fact it took a week longer. If only that were the extent of the misinformation...

Friday, 15 March 2019

BAT research on vaping suggests that for every 'switcher' there is a new user.

"Accelerating" is the key word in the presentations made by British American Tobacco to its investors yesterday. Not just accelerating the growth in new customers for its modern nicotine products, but also in "accelerating delivery" both of profits and of nicotine to those users.

A quick look at some of the statements they made which might be of interest to Canadian tobacco policy-makers.

New nicotine products (i.e. vaping) have reversed the decline in tobacco use.

In BAT's largest 40 markets (excluding the USA), the number of nicotine users (including both smokers, vapers and people who use oral tobacco) is now higher than it was a decade ago. The epidemic of nicotine addiction is not shrinking - it is growing.



Forecasting suggests vaping products will not reduce the number of smokers

BAT is not predicting that vaping will replace smoking, but that it will add to it. Their 5 year forecast shows a very slight decline in cigarette smokers (even slower than the death rate would suggest), and a steady growth in other product users. (In the chart below, light blue is vaping, yellow is heat not burn and green is modern oral tobacco, discussed below).

Public health officials may be hoping that vaping will replace smoking -- but BAT is assuring its investors that this won't happen.



Vaping is now the main gateway to nicotine use for Canadians.

Over decades, Canadian governments have put laws in place to remove inducements for young people to smoke cigarettes. Television ads, billboards, retail displays and sponsored events promoting cigarettes have been squeezed out of young people's environment. But the same laws are not in place in Canasda (except in Quebec) for vaping products. The result, according to BAT research is that 5 in 10 "entrants" (new users) to the nicotine market in Canada are attracted first to vaping products.



Vaping is not for switchers, its for starters.

The rationale given by Canadian governments (and others) for a lax approach to regulating vaping was that they wanted to encourage smokers to switch to products which were viewed (by government and others) as less harmful. But it turns out that more than half of those who use vaping products are non-smokers - a situation unlike heated tobacco products, where only 1 in 10 users are not already nicotine users.



BAT's primary marketing tools are not embraced by traditional FCTC-style regulation

Big data, direct contact with consumers, digital marketing and retail loyalty programs are the primary arrows in BAT's marketing quiver. By contrast, Canada's recently revised Tobacco and Vaping Products Act is constructed around traditional broadcast marketing (as are other countries). There are few measures yet in place to monitor, let alone regulate, these activities.


These are only a few of a hundred of more slides that cover important topics like poly-use, new products, regulatory impact, menthol bans and more. Food for thought!

Monday, 11 March 2019

JTI-Macdonald's promotional budget is a whopping $100 million per year - 25% of its earnings from cigarette sales.

A week ago, the Quebec Court of Appeal upheld a lower court ruling against the three main tobacco companies operating in Canada. JTI-Macdonald , the smallest of the three companies, created a bit of a commotion when it promptly filed for creditor protection under the Canadian Companies' Creditors Arrangement Act (the bankruptcy law for big companies).

One of the requirements of their application to the court was to disclose financial information, including a forecast of their revenues for the next few weeks.  This material was found as Exhibit DD in in Volume 4 of their application, which can be downloaded from the accountants managing the application. (It begins on page 176).

From this, we now know that the annualized anticipated gross revenue from sales will be about $1 billion, of which $575 million will be turned over to governments in the form of excise taxes and GST/HST. That leaves about $385 million in sales revenue net of consumer taxes for the year.

So far, so good. But it gets even more interesting.

JTI-Macdonald Cash Forecast
13 weeks, Spring 2019
A few lines down is the entry related to "Promotions and Marketing."

Canada is a country which decades ago banned conventional tobacco advertising. Yet JTI-Macdonald anticipates spending about $100 million on "various marketing and promotional initiatives, such as inventory support programs and brand support programs. Initiatives are generally paid 30 days in  arrears or via quarterly installments."

This, folks, is the amount they spend on paybacks to retailers. We have been told by retailers that they receive monthly payments from JTI in return for meeting their sales quota, but this is the first time that the amount has been made public. (Health Canada requires companies to report certain promotional expenditures but this is not among them.)

Elsewhere in the filing (in Volume 2), JTI mentions that it deals with 28,0000 retailers. If all of them get payments, it would add up to an average $3,495 each!  As below the radar bonuses go, that's not too shabby.

Otherwise expressed, for every $1 in revenue that JTI-Macdonald generates from cigarette sales, it spends $0.25 on promotional support. Is this what a ban on tobacco promotion is supposed to look like?

Wednesday, 27 February 2019

Is Health Canada really going to let Imperial Tobacco off the hook for its illegal vaping ads?

Before Bill S-5 was passed, a number of health groups (including our own) warned parliamentarians that this law would pave the way for tobacco companies to return to television advertising. Regretfully, we were right.

Hill Times Ad, May 2017

Between September and November  last year, Imperial Tobacco broadcast ads for its Vype Epen 3 on Canadian television stations. Although TV ads were permitted by the law, in our view this one was not. In October, we filed a complaint with Health Canada, pointing out where the advertisement contravened the sections of the Tobacco and Vaping Products Act which prohibited lifestyle advertising (s. 30.2).

And there it seemed to sit. We received no written response from the department, and it was not clear whether or when they had taken any enforcement action.

As it turns out, Senator Seidman had also been concerned about the advertisement, and on November 28th used her opportunity during the Senate's Question Period to request information on any enforcement actions. The Senate returned from its winter break last week, and the following reply was tabled on February 19:
Health Canada has initiated action. A notice of non-compliance was sent to Imperial Tobacco Canada on November 1, 2018. The notice demands that the company immediately cease the promotion of Vype Epen3 by means of lifestyle advertising on Canadian television and social media platforms.
Health Canada has a rigorous compliance and enforcement program in place to ensure that manufacturers, importers and sellers of vaping products comply with the Tobacco and Vaping Products Act (TVPA). If necessary, Health Canada will take further enforcement measures.
Under the TVPA, only information and brand-preference advertising of vaping products is permitted. The TVPA bans advertising appealing to youth, lifestyle advertising, and sponsorship promotion, and restricts giveaways of vaping products or branded merchandise.
Additional restrictions came into force on November 19, 2018, including prohibitions on the sale and promotion of vaping products with features that are appealing to youth, the marketing of products using flavour names associated with candy, desserts, or soft drinks; and product promotion by testimonials or endorsements.
This answer raises more questions.

  • If the company was asked to "immediately cease the promotion of Vype Epen3 by means of lifestyle advertising", why was the television ad allowed to continue? 
  • Will the department lay charges for the more than 1,000 broadcasts of the ad which were made after November 1?
  • Will they lay those charges quickly?   Section 51 of the Tobacco and Vaping Products Act requires that such charges be laid within 2 years of the offence being committed.  That makes November 18, 2020 the last possible day to lay charges before the guilty parties get off scot-free.
  • Will the television stations which profited from the broadcasts also be charged? 
  • Are there any consequences at all for nicotine multinationals and broadcast giants who contravene health law?
  • Imperial Tobacco was also asked to immediately remove lifestyle ads from "social media platforms." So why are thousands them still there? (See our blog of February 7, 2019).
  • Why do you have to be a Senator to get information in writing on enforcement of the law?

A list with more than 1,000 occasions when the Vype ad was broadcast in Canada after Health Canada informed Imperial Tobacco to "immediately cease" can be downloaded here. (The records were found in the program logs filed by broadcasters with the Canadian Radio-Television and Telecommunications Commission).




Thursday, 7 February 2019

Imperial Tobacco slips through cracks in federal vaping ad restrictions. Provincial governments (especially Quebec) do better.

Health Canada's new law on vaping products (the Tobacco and Vaping Products Act, TVPA) received Royal Assent on May 23, 2018. 

This was the starting gun on a race to dominate the legal vaping market. Some 8 months later, it seems that the federal rules for this race that were set in law are even weaker than expected, and have resulted in pervasive lifestyle ads -- except in Quebec and other provinces that have taken a better approach..

The federal law -- a permissive structure

The structure adopted in the TVPA is one that gives nicotine manufacturers a general permission to advertise, and then identifies styles of ads which are not permitted (i.e. lifestyle ads, ads that appeal to young people, testimonials). This “everything is permitted unless it is expressly forbidden” approach is the opposite of what the same law does with respect to tobacco products, where a a general ban on tobacco advertising exists, with some specific exemptions (i.e. direct mail addressed to adults). (Compare the law at s. 19-22 to s. 30).

The Quebec law - a restrictive approach

Of Canada's 10 provinces,  Quebec has taken the most comprehensive approach to controlling tobacco advertising. Under the Quebec Tobacco Control Act (updated in 2015), electronic cigarettes are considered a tobacco product. Generally speaking the same restrictions apply to both categories of nicotine products. Vaping ads are tightly restricted, and are banned if they are "disseminated otherwise than in printed newspapers and magazines that have an adult readership of not less than 85%". Even then, printed ads may only "provide consumers with factual information about a tobacco product, including information about the price or the intrinsic characteristics of a tobacco product and about brands of tobacco products." They must also include a prescribed warning.

Other provincial restrictions

Some other provinces have also adopted additional restrictions on vaping ads. Nova Scotia's Tobacco Access Regulations  exempts vaping stores from restrictions on displaying products at retail, but curtails their right to advertise other than by "a door decal"). Manitoba's Smoking and Vapour Products Control Act bans the advertising of vapour products "in any place or premises to which children are permitted access". Similar restrictions are in place in Prince Edward Island's Tobacco and Electronic Smoking Device Sales and Access Act. 

Compare and contrast: Television

Imperial Tobacco has shown that it is prepared to play fast and loose with the federal restrictions, but that provincial laws have offered some protection.

Television advertisements for Imperial Tobacco's Vype ePen3 appeared daily in 6 provinces across Canada between September 3 and November 18th. Television ads are (sadly) allowed under federal law, but lifestyle ads are not. Despite the obvious lifestyle elements of the ad,  it was broadcast until November 18th. 


In January, broadcast logs for Canadian television stations were made public. From these, we now know that Imperial Tobacco's Vype ad was not broadcast in the provinces which have more powerful restrictions in place (Quebec, Nova Scotia, Prince Edward Island, Manitoba). 

This ad was the subject of our complaint on October 18. If any enforcement action was taken by Health Canada against Imperial Tobacco or the broadcasters, no information has yet been made public.

Compare and contrast: Publications 

In English-speaking Canada, Imperial Tobacco has focused marketing efforts on electronic publications, including ads on digital media, including newspapers, Instagram, Facebook and YouTube. As shown at the end of this post, these ads evoke excitement (explosions!), recreation (travel), glamour (sexy ladies!) and testimonials.   

It is not clear at this point whether digital advertisers are respecting provincial laws and preventing these ads from being viewed in jurisdictions like Quebec. What is clear is that the ads that are being published in Quebec in conformity with its law are much closer to the intent of a ban on lifestyle advertising. 

VYPE ads governed by Quebec's Tobacco Control Act
(from the Journal de Montréal, Quebec, February 2019).



VYPE ads governed by the federal Tobacco and Vaping Products Act
(from Instagram, Facebook, Sports Net and YouTube, January-February 2019)