This post reports on recent actions by tobacco companies which signal new products or activities in Canada.
Philip Morris International plans to sell "tobacco free" heat not burn
On Thursday, September 28 one of the world's two largest tobacco companies made a series of presentations to investors, the slides from which are available on their website. Within this series of presentations was an explanation of their new "LEVIA" heat sticks.
This heat stick is designed to work with the fourth generation of IQOS heat-not-burn electronic devices, ILUMA. This device uses a somewhat different heating system which does not pierce the heat stick and the tobacco (TEREA) or tobacco-free (LEVIA) sticks sold for it are not compatible with other sticks. ILUMA is not yet sold in Canada, but is intended to be present in 50 markets by the end of this year. (slide 8) (Lat month it became available for sale in the UK).
Conceptually, the LEVIA sticks are similar to those developed in Canada by PODA before the intellectual property for the novel nicotine delivery system was sold to ALTRIA last year. (Altria is a partner with PMI in IQOS distribution in the United States).
Earlier this year, PMI advanced the registration of trademarks for ILUMA, TEREA and LEVIA in Canada. There is no requirement for the company to provide regulators of advance notice of their intention to sell these products. Because they are made with tobacco, the TEREA sticks would be taxed federally as manufactured tobacco sticks, at a per unit rate lower than cigarettes and would be subject to provincial restrictions on tobacco flavourings. Because LEVIA produces a nicotine aerosol, it would likely be regulated as a vaping product in Canada, taxed accordingly, and subject to provincial flavour restrictions."POP TUCK FEEL"
In late September, the auditing firm engaged in Imperial Tobacco Canada Ltd insolvency proceedings reported to an Ontario court that "Imperial anticipates launching Zonnic in Canada in the fourth quarter of 2023."
Zonnic is the brand name for the first nicotine pouches to be authorized for sale in Canada by Health Canada. A sneak-peek at the packaging is available on the Zonnic Website, which encourages visitors to "stay tuned".
As described here earlier, there will be few regulatory restrictions on the 5 permitted flavours of the 4 mg pouches. These products do not fall under laws which establish minimum age for sales, taxes, mandatory warnings, restrictions on television, billboard advertising or in-store displays.
A marketing slogan filed with the trademark office last spring: "POP, TUCK, FEEL" seems likely to be intended for these nicotine pouches - it is the same slogan BAT uses to sell its VELO brand nicotine pouches in the UK.
Noting the way BAT markets Velo and PMI markets Zyn, other countries have moved to tighten laws and prevent nicotine pouches from becoming a starter product for nicotine addiction. The Netherlands government responded to the sale of these products by commissioning research from its public health researchers, following which it banned the sale of pouches with 0,035 milligrams or more nicotine per pouch in November 2021. Belgium similarly imposed regulations which ban their sale (in March 2023).
Renewed "contraband" campaigns on the way?
Last week a series of press releases were issued to raise alarm about contraband cigarette sales. Tehse included the release of a report prepared by EY and commissioned by the Convenience Industry Council of Canada. "Canadians losing billions to organized crime". This was soon followed by a report from Imperial Tobacco on contraband in the prairies.
This activity echoes previous collaborations between the convenience industry and tobacco companies to amplify concerns about contraband in order to pre-empt tax increases or regulation. And recent trademark registrations suggest a new campaign is on its way.
This summer Philip Morris International tried to registered not one but two designs for "Fight Contraband. Fight Together" in connection with proposed "Illicit Trade awareness programmes". The last record on the trademark office's database is that the trademark regulators considered this "Goods or Services Not Acceptable"
Cheap cigarettes - whether they result from contraband sales, low tax rates or discount pricing - undermine public health because affordability is a major driver of continued smoking.
In contrast to the cries of alarm from tobacco companies, Revenue Canada has produced its own estimates of the underground economy, with the most recent update for the 2014-2018 period. The CRA report attributes illegal and untaxed tobacco to be responsible for a tax loss of about $400 million, representing 4% of the excise tax revenue. By contrast, personal under-reporting of income (i.e. construction jobs done "under the table") and under-reporting and under-payment of corporate income tax is estimated to cost $5.1 billion to $8.3 billion in lost tax revenue.
