The
U.S. Food and Drug Administration’s effort to curb
the increase of nicotine addiction, particularly among
younger smokers, is unlikely to hurt the tobacco industry, experts said.
The FDA
is concentrating its efforts on banning flavors from both traditional
combustible cigarettes and e-cigarettes. The FDA plan is to eventually
eliminate menthol cigarettes, which represent about 35 percent of the
traditional cigarette market. Menthol cigarettes are used disproportionately by
people of color.
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For
so-called e-cigarettes, the FDA is working to restrict the sale of flavored
e-cigarettes except menthol, mint and tobacco flavors. E-cigarettes currently
come in hundreds of flavors ranging from chocolate to tropical fruit.
The
role of flavors in enticing both adults and children into nicotine addiction is
as of yet unclear, said Stephanie Miller, an analyst with Height Capital
Markets. There are many types of products on the market, and smokers are likely
to substitute another cigarette product for those that have been banned or
discontinued, she said.
“If the
goal was to close the spigot on these products, I don’t see this as doing that
at all,” Miller said. “I was surprised the FDA didn’t come out stronger.”
YEARS BEFORE A BAN — IF IT HAPPENS AT ALL
For
traditional cigarettes, there may not be enough scientific evidence to prove
that menthol is any more dangerous or more addicting than other products,
according to a report by analysts Bonnie Herzog and Patty Kaneda at Wells Fargo
Securities. The industry is also likely to challenge a ban in court. Any ban
would be at least two years away, they said.
“We
continue to believe an ultimate ban of menthol in cigarettes is very unlikely,”
the analysts said in the report. “We think the tobacco industry would mount a
forceful defense.”
Instead
of a ban, the FDA could restrict or lower the level of menthol in cigarettes.
British American Tobacco company, the maker of Newport menthol cigarettes, and
Altria, the maker of Marlboro, which also comes in menthol, would be most
affected by a ban, according to Wells Fargo.
About
55 percent of British American Tobacco U.S. sales are menthol, while about 21
percent of Altria’s U.S. volume is in menthol, according to the Wells Fargo
report.
Before
a ban could occur, the FDA would first have to issue a rule, followed by a
public comment period.
“It’s
hard to know if menthols were removed from the market tomorrow, how many people
would switch to non-menthol cigarettes or how many would switch to other
products,” Miller said. “There are lots of ways to get nicotine, and these
companies would be incentivized to move people to other products in the event
that menthol goes away.”
E-CIGARETTES NOT GOING AWAy
For
e-cigarettes and vaping, which has become a $6.6 billion industry, eliminating
flavors is unlikely to slow the adoption of these products by people under 25,
Miller said. “It’s more than just flavors that has been attracting youths to
these products, and the fact that mint and menthol will still be on the market
probably means people will just end up switching to them.”
A study
by the University of Southern California in Los Angeles found that teens were
developing Vaping Shop UK and e-cigarette habits because of peer pressure and because
of the belief that the products weren’t harmful.
Both
traditional tobacco companies and e-cigarette companies will continue to invest
heavily in vaping and e-cigarette products, Miller said. They will compete on
price and design, while also working to educate smokers about their benefits
versus combustibles. In addition, e-cigarettes tend to have higher margins than
traditional tobacco products and are less likely to be deadly.
“People
are moving to e-cigarettes and that isn’t going to change,” Miller said. “These
regulations won’t slow the investment by these companies. In fact, they
incentivize them to produce even more products for current users.”
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