Tag Archives: tobacco industry
The largest cigarette producers could compensate $2 billion under an advised deal with attorney general of the State in order to settle a prolonged dispute over payments required by the landmark 1998 tobacco settlement.
Negotiators for Altria Group Inc.’s Philip Morris USA and other cigarette enterprises have achieved a provisional deal with officials representing the 46states that signed the 1998 Settlement Agreement.
Native American cigarette brands, as for instance Seneca, account for more than 4% of U.S. volume.
The given agreement would permit leading tobacco companies to keep part of the funds they have kept from states or disputed under the 1998 pact, in accordance to which they agreed to pay about $200 billion in order to help states charge the costs of curing sick smokers.
In concordance with the new deal, moneyless states would obtain several billion of the contested dollars. The deals also would review the rules to how states charge fees and taxes from smaller enterprises that haven’t joined the 1998 agreement.
If the deal will be introduced, the main loser could be Native American tobacco companies, which have become powerful competitors with their cheap brands. The deal would require states to introduce rules demanding these enterprises to start paying sate excise duties and fees for sales on tribal lands, which could oblige them to raise prices. Advocates representing Indian cigarette interests are currently threatening legal challenges.
“What the states and companies are doing is not right. All states under the present deal would be disputing tribal economies in order to protect largest tobacco companies’ market shares,” stated Lance Morgan, chief manager of the Ho-Chunk Inc., which distributes tobacco products on tribal lands.
Native American brands as King Mountain, Mohawk and Seneca account for approximately 4% of the U.S. cigarette volumes, according to Morgan Stanley findings.
Altria, Reynolds American Inc. and Lorillard Inc. refused to comment on the issue.
Several states have adopted laws requiring the nonparticipating enterprises to put money aside in escrow accounts. In 2010, the U.S. market share of nonparticipating enterprises increased to 6.5%, the highest figure since 2004, when it remained at 8.27%.
In order to decrease their annual payment, the largest tobacco companies should demonstrate that their market-share loss is mostly due to the agreement. They successively have observed the condition, according to enactments by independent consultants.
An arbitration committee has started examining the issue in determining how to proceed with about $1.1 billion in disputed 2003 payments.
How much the enterprises would gain through the new agreement depends mostly on how many states participate in it. In case all states and U.S. territories in the 1998 agreement sign on, the tobacco enterprises would gain nearly $2 billion.
The leading privately-owned cigarette maker said last week it has purchased the rights for an aerosol nicotine-delivery technology created by Jed Rose, head of the Duke University Center for Nicotine and Smoking Cessation. The school was not part of the agreement with tobacco Company and won’t get any payment. Terms of agreement are not revealed.
“By removing the process of burning, developing a way of delivering nicotine through inhalation but without the hazardous chemicals, we might decrease the health complications and deaths related to smoking,” admitted Rose, who headed the initial tests in the 1980s which allowed to paving the way for development and commercial usage of nicotine patches as smoking cessation therapy.
“We hope that we created a technology that will help to leave tobacco burning in the past.”
Rose added that Philip Morris International, based in New York and Switzerland, will now focus on developing commercial products applying this technology. The nicotine-delivery system developed by Rose is different from the medical nicotine inhalers selling currently as cessation treatments since it delivers nicotine faster imitating nicotine delivery given by cigarettes.
“The other systems of nicotine delivery are not able to the satisfaction smokers they need,” Rose noted.
The agreement is an essential “step in the efforts to develop nicotine-delivery products that can potentially decrease the risk of smoking-related health complications,” Peter Nixon, Philip Morris International’s spokesman declared.
Nixon added that it might take up to five years to create a commercial nicotine product which could be used as an alternative to cigarette smoking.
The company’s shares gained more than 1 percent, totaling $70.42 after the agreement was revealed.
PMI move is the latest in the recent series of decisions by major tobacco groups to enter the market of smokeless tobacco products and innovative nicotine-delivery products while tax hikes, anti-smoking policies and social stigma contribute to falling demand for cigarettes.
In April, PMI’s main rival, British American Tobacco established a division named Nicoventures which will concentrate on alternative nicotine products. In 2009, Reynolds American, second-biggest tobacco group in the U.S. acquired purchased Sweden-based company Niconovum that manufactures nicotine pouches, gums and sprays helping smokers to quit.
“It’s a fact that people smoke to get nicotine fix and die from tobacco smoke,” states David Sweanor, a Canadian law professor who works with tobacco industry. The major question is, “Could you offer them nicotine without the tobacco smoke in a way that could be consumer acceptable.”
The U.S. Food and Drug Administration is working to make up recommendations for companies interested in creating what the organization names modified-risk nicotine products.
“Changing regulations are contributing to an environment where competition would move this market category considerably,” the scientist added.
Philip Morris International, the leading private tobacco company in the world, yielding only to China National Tobacco Corporation, controlled by the government, spun off from Altria Group, owner of Philip Morris USA, which markets Marlboro, Parliament and other brands.
Suffering tough restrictions in the United States, multinational tobacco enterprises are more and more promoting their products in developing countries, mostly among women and adolescents.
While smoking rates in certain industrially developed countries are dropping at about 1% per year, those in developing countries are rising at around 3%.
According to estimates, if present trends continue within next 30 years, more than 7 million people from developing countries will die from tobacco related illnesses.
For the past years, tobacco companies as British-American Tobacco, Philip Morris and RJ Reynolds have been extending rapidly in Africa, Asia, Eastern Europe and Latin America.
“In the US, Hispanic minorities have been mostly attracted by the tobacco manufacturers since the early 1960s, and have received a great dose of advertising,” said Jeanette Noltenius, an expert on tobacco and alcohol abuse issues.
Bureau of Census, U.S. Department of Commerce stated that the number of young Latino smokers will increase by 2020, constituting 19% of young American smokers, up from 9 at present.
Since 1980 the American trade officials, conducted a long campaign to open and promote markets in Japan, South Korea, Taiwan and Thailand. For instance in Taiwan all these efforts brought to increased levels of smoking mostly among women and kids.
These actions have urged the Asia-Pacific Association to stand against what they suppose an invasion of their countries by U.S. companies attracting Asian women and children.
Various researches demonstrate that in the poorest households in emerging countries, 10% or more of the total household expenditure is comprised in tobacco. Thus there is less money for main items like food, education and health that brings to unbalanced diet, illiteracy and premature death.
Currently in China tobacco enterprises are moving continuously inland with intensive advertisement campaigns. It was estimated that of the world’s 1.71 billion smokers, more than 350 million live in China, where the rate of lung cancer has been raising 4.75 % per year.
The Chinese government officials are facing a dilemma of advertising tobacco cessation programs while it substantially depends on profits from the state-run tobacco company.
Researches from the School of Public Health at the University of California declare that increasing the tobacco tax by the equivalent of 15% per cigarette pack could save more than 13 million lives and accumulate $9.5 billion in revenue for the Chinese government.
While U.S. anti-smoking organizations wait a particular moment for action, those in developing countries are less effective. Such countries’ policies and programs won’t be efficient unless transnational tobacco companies are made to limit their persistent promoting.
The Common Market for Eastern and Southern African (Comesa) is against the World Health Organisation’s actions to prohibit particular ingredients that are used in manufacturing blended tobacco.
These ingredients are produced in specially designed laboratories ranging from sugars, sweeteners and such flavors as vanillin and menthol that are used to improve the palatability of tobacco products.
For example Burnley is a popular tobacco type in British American Tobacco markets, which is the most grown tobacco type in the Comesa region, mainly in eastern and southern African countries of Malawi, Mozambique, Tanzania, Uganda and Zimbabwe and which requires blending procedure.
The majority of scientists state that smoke from burley tobacco has an unpleasant taste during curing, requiring use of such ingredients as menthol, glucose and ginger or blending it with other types to soften its harsh taste.
A prohibit on the production of blending compounds would mean a loss of market for Comesa grown tobacco, and a significant loss for farmers.
At the recently conducted summit of Comesa in Swaziland, participating countries decided to solicit the UN at the forthcoming UN General Assembly to examine the Millennium Development Goals in New York (MDG).
The economic bloc declared that the WHO and other international agencies try to perpetuate poverty in Africa, bringing health arguments into order to cut down its product – in this case tobacco out from the world market.
It is expected that the bigger economies of bloc as for example Libya, Egypt and Kenya, despite not being the largest manufacturers of tobacco, will try to influence the WHO to change this ban.
The WHO’s Framework Convention on Tobacco Control (FCTC) proposed to implement a ban on laboratory-produced tobacco ingredients, according to the guidelines 9 and 10.
For the majority of Comesa members who are fighting to get rid of poverty through agriculture, adopting the WHO guidelines would mean a big loss for many tobacco growers who haven’t another alternative, and consequently a deterioration of national economies.
Poverty reduction is the main task of MDGs and no continent is more affected by poverty than Africa.
“I think that it is a very thrilling situation for many countries, considering the fact that 19 Comesa countries have united to oppose the WHO decision,” stated Francois van der Merwe, chairman of the African chapter of the International Tobacco Growers Association.
The big problem in this situation is that WHO officials in Geneva don’t understand how important the tobacco industry is to many African countries and what unpleasant consequences this ban will have for many of these countries.
For example in Malawi, 70 % of the population gains on its livelihood from the tobacco industry, with 700,000 farmers occupying with tobacco cultivation.
According to the results of a research accomplished by Substance Abuse and Mental Health Services Administration the rates of minor boys who use chewing tobacco have increased from 3.5 to 4.5 percent within 5 years, making it a 30 percent rise. Scientists have underlined that teenagers who preferred using smokeless tobacco have been living mainly in rural areas.
As regards the use of chewing tobacco among adult population, the numbers have remained relatively stable, increasing by only 0.3 percent from 3.0 to 3.3 percents.
The survey regarding smokeless tobacco use found out that almost 8 million people aged 12 and older admitted chewing smokeless tobacco during last year.
During the nationwide survey around one million minors were proposed to answer several questions related to using tobacco for chewing, inhaling, snorting and mixing with gums. According to the survey results almost 400,000 teenagers said trying or using chewing tobacco regularly.
Other results of smokeless tobacco use survey indicated that:
- The overwhelming majority of actual users of chewing tobacco (86%) admitted to smoke cigarettes at least 10 times and 40 percents of surveyed minors lighted up within last couple of months.
- Many regular smokers switched to using chewing tobacco thinking that it would help them give up smoking, however the majority of them (almost 90%) were still puffing on their cigarettes after almost a year of chewing smokeless tobacco.
- Amidst people who had tried both cigarettes and chewing tobacco at least once during their lives, 66 percent began smoking before using smokeless tobacco; 32 percent of surveyed tried chewing tobacco first and 2 percent admitted to begin smoking and chewing simultaneously.
- Men are almost 20 times more likely to use smokeless tobacco for chewing than women.
Prof. Jonas Smirnoff, one of the survey leaders commented the results of survey saying that users of smokeless tobacco have not been aware that chewing tobacco was a not a healthier substitute for cigarettes, as smokeless tobacco has been linked with oral cancer risk for a long time. Scientist also added that smokeless tobacco could contribute to becoming nicotine addicted as well as in case with smoking usual cigarettes.
Jennifer McNally, assistant to president of the campaign for tobacco-free kids advocacy group stated that the trend of using chewing smokeless tobacco among minors has been raising more and more concerns among scientists and physicians.
She blamed tobacco industry for luring adolescents to start chewing tobacco in order to become more popular among their friends.
Mrs. McNally indicated that the recent increase in the rates of teenage tobacco chewers is closely related to the increase in the tobacco companies’ investments in advertising their products and attracting minor audience by indirect propaganda of smokeless tobacco.
The recent surveys raised many demands to give the U.S. Food and Drug Administration the power to ban the use of smokeless tobacco among minors as well as to regulate tobacco products.