8 Insights From Day 2 of the Total Nicotine Conference

Drilling down to the category level: e-cigs, RYO, cigars and of course more on ‘deeming’

CHICAGO -- For the second day of CSP’s Total Nicotine Conference, the focus narrowed in on more category-level concerns, with segment-specific presentations from Logic Technology Development, Republic Tobacco,  JTI and Scandinavian Tobacco Group. Not that the day was free of the federal elephant in the room: Andrew Perraut, formerly of the White House Office of Information and Regulatory Affairs (OIRA), closed out the session with his unique insider perspective on the U.S. Food and Drug Administration’s (FDA) “deeming” regulations.

Here are eight things we learned from those five presentations:

Roll With It
Brion Gillette, key account manager for Republic Tobacco, shared that the majority of cigarette papers—72.6%—are sold sold at convenience stores. The segment offers high margins for little space, prompting Gillette to urge retailers to rethink their paper strategy.

Pipe Packs a Punch
Bill Noah, director of strategic accounts and category leadership for Scandinavian Tobacco Group, acknowledged that pipe tobacco accounts for just 1% of total tobacco sales at convenience, with stores averaging about three pouch sales per week. But he pointed out that the margin on those three pouch sales was the same as the margin retailers make on 12 packs of cigarettes.

SKU-ing Cigars
Noah also cited data from Management Science Associates (MSA) showing that only 57% of mass-market cigar SKUs account for 80% of that segment’s sales. “Maybe it’s time to ask: are we over-SKU-ed in this category?” he said.

A 'Slippery Slope'
Christopher Greer, corporate affairs director for JTI, offered a broad and international perspective on regulations, describing them as a “slippery slope” that isn’t limited to tobacco. “What happens in tobacco sets a negative precedent that can (and probably will) be applied to other categories,” Greer said, pointing to other countries that have now tried to apply graphic warning labels to alcohol, soda and even Big Macs.

The Price Of Compliance
Kevin Roberts, Logic’s director of regulatory affairs and communications, predicted the price tag for premarket tobacco applications (PMTAs) will be much, much higher than the $330,000 the FDA estimated. Logic’s estimates put it closer to $10 million, with Roberts saying that two years will be “a really aggressive timeline” in which to complete the process. “It ain’t cheap and it ain’t easy,” he said.

Whom Does CTP Answer To?
Perraut, who now runs his own consulting firm, Radiant Strategies, highlighted a big problem facing manufacturers hoping to get FDA approval through either the PMTA or substantial equivalence (SE) pathways. “The Center for Tobacco Products (CTP) is not required to make a ruling on SE or PMTA applications,” Perraut said. “It’s a major concern. The process has not been swift at all with products they already regulate.” When asked who holds the CTP accountable for SE, PMTA and other tasks, Perraut admitted there’s “not a definite answer.” The White House, Congress and Department of Justice all play a role, but it “will likely be the courts (via lawsuits) in this case.”

Just the Beginning
As concerning as deeming is, Perraut cautioned that it’s “in many ways only providing a framework for future regulations.” Additional likely FDA actions include a flavor ban (though the timing is uncertain), clarification on whether certain tobacco products should be regulated as a drug or device (scheduled to come out in fall 2016) and additional manufacturing requirements (scheduled for the end of 2016).

The White House Wants to Know
“The stakes are very high,” Perraut said in closing his session. “I strongly recommend everyone engages with the process. Your comments on regulations really do make a difference, especially when data is provided. The White House really does consider your point of view--but they need that information.”

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