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What’s Ahead for the 2020 Tobacco Landscape?
The tobacco industry may have had the most tumultuous year any of us can remember in 2019. The industry saw nearly double-digit declines in cigarette volume that was truly a bell ringer for everyone, including the manufacturers. For the first time ever, as far as I can tell, Big Tobacco raised prices three times in a year that amounted to over $2 a carton whole- sale, and with reductions on buy downs, nearly $3 at retail
Multiple states banned flavored vape products as a mysterious lung disorder claimed lives around the country, only to have many of them reversed or temporarily put on hold in court after retailers scrambled to pull them off their shelves before the products became illegal.
The success of ZYN, a “clean nicotine” product, spurred the launch of new products in this new category from cigarette and cigar companies alike. Fourth-tier cigarettes made further inroads and made many parts of retail look like the Wild West again for smokes.
It can’t get any crazier in the tobacco world than it did in 2019. Or can it?
The uncertainty swirling around the industry at the moment is all about vaping. Everyone is asking whether the Food and Drug Administration (FDA) will ban flavors and when that will occur, but it’s not that simple. The PMTA (premarket tobacco product application) process is getting close to the May 2020 filing date. Some products have already declared they are coming off the market, and there will be more to come. Will there be a grace period for products the FDA might remove, or will retailers be stuck holding the bag on non-guaranteed products?
In the cigarette world, many industry veterans anticipate four price increases in the coming year as the consensus seems to be that the big manufacturers aim to make as much profit on cigarettes as possible as volumes continue to shrink.
Meanwhile, surveys show retailers that sell fourth-tier cigarettes are experiencing much better results, and this is in a strong economy with full employment. Will incentives increase for EDLP (everyday low price) products, or will support for products not on the program decrease as the gap between major brands and off-brands grows wider?
Then we see IQOS (heat-not-burn tobacco) being tested in Atlanta, which at some point should expand to new markets, but will this be
the product that resurrects the category, or will it turn out to be another eclipse?
After the success of ZYN, it seems every manufacturer wants to jump into clean pouches and anything else that can be a nicotine delivery piece. But counter space is limited. Retailers are waiting for a company to take the lead on developing a “set” for all the new products already launched and those in the pipeline.
The major segments only scratch the surface of the 2020 outlook and the accompanying chaos. A ban on flavored cigars still lurks and was likely delayed due to the rush to regulate vape. Will premium cigars be subjected to FDA regulations that guide other segments of the tobacco category? Will menthol be banned? No one has a crystal ball, but with all the questions surrounding the industry, we can be sure we will be in for one heck of a wild ride during the next 12 months.
Judge Overturns FDA Rule on Premium Cigar Warning Labels
February 6, 2020. U.S. Federal District Court Judge Amit Mehta issued a ruling on February 3, overturning the Food and Drug Administration’s (FDA) regulation that required six new health warning statements for premium cigars to be printed on premium cigar packaging/cigar boxes and premium cigar advertisements. The court found that “the FDA’s subjecting of premium cigars to warnings requirements to be arbitrary
   soundwave - winter 2020

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