OAKBROOK TERRACE, Ill. -- There was no shortage of tobacco-related headlines in 2014, from the landmark merger between Reynolds American Inc. and Lorillard Tobacco Inc. to the exit of a major drug chain from tobacco business all-together. Not to mention, the U.S. Food and Drug Administration (FDA) finally released its proposed deeming regulations for e-vapor products, cigars and pipe tobacco.
Yet as the ball dropped into a new year, we were left with more questions than answers surrounding last year’s biggest tobacco newsmakers. Indeed, some of the most pressing issues facing the tobacco industry in 2015 are directly linked to the big stories of 2014.
Here’s a look at 2015’s top tobacco unknowns:
What Will the Final Deeming Rules Look Like?
When the FDA’s Center for Tobacco Products (CTP) released its
proposed deeming regulations last April, some decried the proposal as not strict enough (with no ban on flavors, advertising or online sales) and called for further regulations; others pointed out that the expensive Pre-Market Tobacco Applications (PMTA) requirement will effectively eliminate the vast majority of vaping companies and called for a
moving of the Substantial Equivalent (SE) grandfather date. Such perspectives were undoubtedly included in the nearly 82,000 comments submitted to the FDA on the proposed regulations—comments the agency is legally required to review and address. The
law gives the FDA up to a year to review these comments, meaning we should receive some clarity by August. Should the agency propose any additional regulations based on these comments, we’re looking at another public comment and review period. In other words, it’s entirely possible that we won’t truly get clarity on deeming until 2016.
Reynolds-Lorillard: What Stays and What Goes?
After months of speculation, No. 2 tobacco player Reynolds American
announced a definitive agreement to acquire No. 3 player Lorillard last July. The $27.4 billion deal came with some surprises (namely the dropping of Lorillard’s then top-selling e-cig brand blu eCigs) and stood to create a new Big Tobacco entity through Imperial Tobacco Group’s $7.1 billion purchase of the blu, KOOL, Salem, Winston and Maverick brands and other assets (including Lorillard’s sales force and manufacturing facilities). Though top execs from Reynolds and Lorillard—along with multiple analysts—expressed optimism that the deal would garner approval as-is, some industry analysts suspect the deal will face intense scrutiny from Federal Trade Commission (FTC) over antitrust issues, which could ultimately require Reynolds and Lorillard to
divest further brands. One way or another, it’s widely expected that the deal should go through in the first half of 2015 – so it’s not a matter of if, but when (and how) this merger will finalize.
2015’s Next Big Thing?
In the ever-evolving world of e-vapor, today’s hot product is almost certain to be yesterday’s news within a matter of months. Disposables gave way to rechargeables, electronic cigarettes gave way to vaporizers and mods; leaving retailers, manufacturers and analysts alike on the hunt for 2015’s big vapor trend. Management Science Associates senior vice president Don Burke and Wells Fargo analyst Bonnie Herzog have pegged heat-not-burn products, which heat actual loose tobacco as opposed to e-liquids, as a
trend to watch: Philip Morris International is testing an option abroad, Reynolds announced a re-branding and rerelease of its 1990’s heat-not-burn cigarettes and the 2014 NACS Show was filled with vaping manufacturers (including CB Distributors, Ploom and Trendsettah) showing off
various heat-not-burn options. Will 2015 be the year of heat-not-burn? Or is there another trend waiting to take e-vapor by storm?
Will General Garner the First-Ever Modified Risk Approval?
Although tobacco manufacturers have had the option of applying for the FDA’s permission to market a tobacco product as “modified risk” since the 2009 enactment of the Family Smoking Prevention and Tobacco Control Act, we have yet to see a tobacco company succeed in this pathway. That may change in 2015. Last June, Swedish Match revealed that it had
started the modified risk tobacco product application (MRTP) process for General Snus; shortly after, the FDA said its scientific advisory panel would review the 100,000-page application the next time it meets and, perhaps more telling,
announced a public commenting period on the issue (marking the first time the FDA has sought public input on a MRTP application). The FDA has a year from the date it received the application to announce its decision, meaning 2015 could mark the first-ever modified risk approval.
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