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Japanese growers to miss out on profit sharing

| November 11, 2015

The average leaf tobacco (all types) grower price for Japan’s 2016 harvest has been set at a lower level than that of 2015 despite the sole buyer’s having announced a week ago that its profits were up.

Japan Tobacco Inc. said yesterday that the Leaf Tobacco Deliberative Council (LTDC), chaired by Yoshio Kobayashi, had released its annual determinations for domestic leaf tobacco cultivation area and grower prices for 2016, in response to a proposal submitted by JT earlier in the day.

‘The Council was in general agreement with JT’s proposal, and determined that in 2016, the domestic tobacco cultivation area will be set at 8,276 ha, a decrease of 3.4 percent compared to the contracted area of the previous year,’ JT said in a note posted on its website.

‘The leaf tobacco grower price for all leaf types will be set at an average of ¥1,877.57 per kg, a decrease of 2.21 percent compared to that of the previous year.

For this year’s harvest, the grower price was set at ¥1,920.1 per kg, an increase of 0.71 percent on that of 2014, ¥1,906.47 per kg, which price was the same as that of 2013 but up by 0.84 percent on that of 2012.

The LTDC is described as a council that confers on important matters concerning the cultivation and purchase of domestically grown leaf tobacco in response to inquiries by JT representatives. It comprises no more than 11 members who are appointed by JT, with the approval of the Minister of Finance, from among representatives of domestic leaf tobacco growers and academic appointees.

In announcing earlier this month its results for the nine months period to the end of September, JT said that its adjusted operating profit for its domestic cigarette business had increased by 5.1 percent (from ¥187.9 billion to ¥197.6 billion).

FDA deeming regs ‘embarrassment to public health’

| November 10, 2015

A US public health expert has issued a robust and detailed criticism of the information publicly available about the Food and Drug Administration’s proposed deeming regulations, as they apply to electronic cigarettes.

In his Rest of the Story blog, Dr. Michael Siegel, who is a professor in the Department of Community Health Sciences, Boston University School of Public Health, described the FDA as being out of its mind. ‘These deeming regulations should really be called “The Cigarette Protection Act of 2015″,’ he said. ‘The regulations are an embarrassment to public health.

‘They create stringent requirements for electronic cigarettes, while allowing the much more toxic real cigarettes to remain on the market, unencumbered and unchallenged by competing products that are much safer and that could have otherwise transformed the nicotine market away from combustible tobacco products, thus saving thousands of lives.

‘The regulations will decimate the e-cigarette industry, forcing thousands of small vapor shops and e-cigarette sellers out of business. This will no doubt result in many vapers returning to cigarette smokers and many potential quitters from trying to quit using these products.’

In making his comments, Siegel made the point that they were based solely on his review of the PMTA (pre-market tobacco product applications) draft guidance that the FDA intended to release in conjunction with the deeming regulations.

The Tobacco Vapor Electronic Cigarette Association (TVECA) had obtained a copy of the FDA electronic cigarette deeming regulations that were sent to the Office of Management and Budget (OMB) for final approval before promulgation, as well as a draft of the guidance that the agency intended to release in conjunction with the deeming regulations, Siegel said. The guidance related to the recommended procedure for filing PMTAs. The TVECA had made the PMTA guidance publicly available on its website, but did not make the deeming regulations available upon the request of the FDA.

Siegel said it was possible, though unlikely, that the actual deeming regulations included exemptions or modified provisions for certain small businesses.

‘I had originally made a decision to postpone my commentary on the draft guidance document until the deeming regulations were released in their entirety, in order to avoid any error in case there are exemptions in the deeming regulations,’ Siegel said. ‘However, I have made the decision to publish the commentary now because by the time the deeming regulations are released, it will be too late to change them.

‘I believe that the risks associated with the possibility that the fine details of the deeming regulations render invalid my commentary below are far outweighed by the benefits of making this information available to the public so that interested parties can provide meaningful feedback to the OMB to inform a properly informed review of the regulations.’

Siegel’s blog is at:


22nd Century settles litigation with former CEO

| November 9, 2015

22nd Century Group, a leader in tobacco harm reduction, announced Nov. 9 that the company and its former CEO and founder, Joseph Pandolfino, have settled all litigation and disputes between the parties.

“As the founder of 22nd Century and as a major stockholder, Joe’s interests are closely aligned with those of other shareholders,” Henry Sicignano III, 22nd Century’s CEO and president stated in a press release. “We look forward to Joe’s helpful input going forward as a strategic consultant who will be tasked with assisting 22nd Century on special projects such as commercialization of Red Sun, Magic and our extraordinary modified risk tobacco products in development: ‘Brand A’ and ‘Brand B.’”

Joseph Pandolfino said, “I am thrilled that all disagreements between me and the company have been resolved. As a strategic consultant, I look forward to working with Henry and the team to create shareholder value. 22nd Century is a unique company with an important public health mission and I remain dedicated to its success.”

The details of the settlement have been disclosed by the 22nd Century in its filing with the U.S. Securities and Exchange Commission (SEC) of a current report on Form 8-K, which is publicly available on the SEC’s EDGAR database on the SEC website,

Buyers in Malawi told to ‘stop growing tobacco’

| November 9, 2015

AHL Group of Companies, Malawi’s sole tobacco and other commodities dealing company, has asked the Ministry of Agriculture and Food Security to consider reversing its decision to allow tobacco multinationals to grow tobacco, according to Malawi24. AHL Group says the policy is hurting ordinary tobacco farmers.

AHL Group’s general manager, Moses Yakobe, has urged the government to bar tobacco multinationals from owning big farms and growing tobacco.

“The question is, what will smallholder farmers do if the business of growing tobacco is also being done by these companies?” Yakobe asked during the official launch of 2015 field meetings and the best burley club award presentation ceremony in Lilongwe.

Speaking during the same function, Kapichila Banda, president of the Farmers Union of Malawi, concurred with Yakobe, pointing out that farmers are not currently making profits because the demand is being swallowed by the multinational tobacco companies who grow tobacco in large quantities.

“This is very dangerous to our smallholder farmers,” said Banda.

At the function, AHL Group, which has been buying tobacco for the past 80 years, awarded K500,000 to Kanthunkako Burley Club, the winner of the 2015 club of the year competition.

Subsidiary companies under AHL Group include Agriculture Trading Company, Malawi Leaf Company and Tobacco Investment, among others.

Support for trade agreement with tobacco ‘carve-out’

| November 9, 2015

The Campaign for Tobacco-Free Kids (CTFK) is urging the US Congress to approve the Trans-Pacific Partnership (TPP) trade agreement, which, if passed, could not be used by the tobacco industry to launch legal challenges against public health measures aimed at reducing tobacco use.

Last week, the text of the TPP, whose eight-year-long negotiations were kept secret from the public, was finally published by the 12 countries that are signatories to the agreement: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam.

The TPP’s implementation would mean the phasing-out of thousands of import tariffs and other trade barriers, the establishment of uniform rules on corporations’ intellectual property, a new code of conduct governing lawyers selected for Investor-State Dispute Settlement (ISDS) panels, and a tobacco ‘carve-out’ from the dispute system that otherwise would allow foreign corporations to challenge governments’ health policy decisions.

ISDS provisions of the TPP proved to be some of the most controversial and taking tobacco out probably allowed the negotiations to continue.

The CTFK described the agreement as a ‘truly historic step for public health’ because it ‘includes a provision that protects the right of participating nations to adopt public health measures to reduce tobacco use and prevents tobacco companies from using the TPP to launch legal attacks on such measures’.

‘This provision is a critical step toward ending the tobacco industry’s growing abuse of trade agreements to challenge life-saving tobacco control measures all over the world,’ the CTFK’s president Matthew L. Myers said in a statement issued through PRNewswire. ‘It sets a precedent for other trade agreements and boosts efforts to combat a global tobacco epidemic that kills millions each year.

‘Until Congress approves this agreement, the tobacco industry and its allies are certain to make every effort to defeat or weaken the provision protecting tobacco control measures. We urge President Obama and members of Congress to stand firm and reject these efforts.’

The New York Times reported in October that even though President Obama had ‘fast track’ trade promotion authority ensuring that trade pacts received expedited consideration in Congress with a yes-or-no vote without amendments or filibusters, the TPP could face months of debate.

At that time – before the text was announced – the Times said that labor unions, environmentalists and liberal activists were expected to argue that the TPP favored big business over workers and the environment.

Volumes down at JT and JTI in first nine months

| November 6, 2015

Japan Tobacco Inc.’s domestic cigarette sales volume during the nine months to the end of September, at 81.3 billion, was down by 3.1 percent on that of the January-September period of 2014, 83.9 billion.

In announcing its consolidated results on Wednesday, JT said that volume sales had fallen because of an industry-wide volume decline and because of intensified competition in the sub-premium price segment.

Core domestic cigarette revenue had declined by 1.1 percent (from ¥483.5 billion to ¥478.2 billion) as a result of the lower sales volume, partly offset by an improved price/mix effect, which mainly occurred in the first quarter, and higher domestic sales of duty-free products.

Adjusted operating profit had increased by 5.1 percent (from ¥187.9 billion to ¥197.6 billion) due to the price/mix effect and the effects of measures taken to strengthen competitiveness. JT reported that in order to strengthen brand equity further, it had continued to undertake marketing and sales initiatives primarily focused on its Mevius brand.

‘In the framework of activities to fortify the brand portfolio, two Seven Stars menthol products were launched to support our growth in the expanding menthol segment,’ the company said. ‘This was in addition to the recent integration of the Caster and Cabin brands with Winston.

‘In a highly challenging competitive environment, JT’s overall share of market has remained stable at 59.9 percent for the nine-month period.’

Meanwhile, Japan Tobacco International’s total cigarette and cigarette-equivalent shipment volume, which includes fine cut, cigars, pipe tobacco and snus, but excludes contract manufactured products, waterpipe tobacco and emerging products, during the nine months to the end of September, at 295.6 billion, was down by 0.4 percent on that of the January-September 2014 period, 296.6 billion.

Within that total, GFBs (global flagship brands) shipment volume was increased by 5.7 percent to 205.4 billion.

The growth in GFB shipment volume was mainly driven by the markets of the Benelux countries and those in Canada, Czech Republic, France, Germany, Iran, Italy, Romania, South East Asia, Spain, Taiwan, Turkey and Ukraine.

‘Total shipment volume declined by a modest 0.4 percent, mainly due to the Middle East and Russia, partly offset by GFB growth and favorable trade inventory movements in Iran and Turkey, the company reported.

‘Market share continued to grow in most of the key markets, namely France, Italy, Spain, Taiwan, Turkey and the UK.’

JTI’s core revenue and adjusted operating profit in US dollars at constant foreign exchange grew by 7.3 percent and 13.3 percent respectively, driven by a robust price/mix and a positive GFB performance.

‘As a result of continued currency fluctuations against the US Dollar, on a reported basis, core revenue and adjusted operating profit declined 14.0 percent and 21.4 percent respectively,’ the company reported.

‘In Japanese Yen, core revenue increased 1.1 percent [from ¥936.9 billion to ¥946.9 billion] and adjusted operating profit decreased 7.7 percent [from ¥355.7 billion to ¥328.5 billion] due to the appreciation of the US Dollar.

Including the results of its other businesses, JT’s January-September revenue increased by 0.7 percent to ¥1,688.5 billion while its adjusted operating profit decreased by 2.6 percent to ¥510.3 billion.

Operating profit was down by 7.2 percent to ¥455.9 billion.

JT’s president and CEO, Mitsuomi Koizumi, said that the company’s international tobacco business had demonstrated a solid performance, driven by increased GFB shipment volume and significant pricing benefits.

“We will accelerate our investments to strengthen brand equity, geographic reach and our emerging products portfolio to continue achieving sustainable mid- to long-term profit growth,” he said.

“Domestically, against the backdrop of increasingly intensifying competition, initiatives to strengthen the product portfolio and brand equity further have ensured that our market share remains stable.

“The ongoing solid business momentum gives us confidence to achieve mid- to long-term profit growth at constant FX, allowing us to revise the forecast for year-end dividend per share upwards.”

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