FDA Plans Crackdown on Flavored E-Cigarettes

15 November, 2018, 18:29 | Author: Regina Silva
  • Cigarettes

British American Tobacco PLC (LON:BATS) topped the list of FTSE 100 fallers on Monday after reports suggested the USA government is considering banning menthol cigarettes.

BAT owns Newport, the leading menthol brand in the United States, and sales of the mint-flavoured products there are estimated to bring in a quarter of the company's revenues, according to analysts at Morgan Stanley.

The U.S. Food and Drug Administration wants to ban traditional menthol cigarettes as part of the campaign against tobacco products.

The same year, the FDA also said that menthol cigarettes pose a larger health risk to the public than traditionally-flavored brands because they tend to be more hard for users to quit. The final rule banning menthol could take a year or more, and the enforcement could take another year, sources said. "The agency said use of the cigarettes, which are flavoured with the compound menthol, was likely associated with increased smoking initiation by youth and young adults, possibly because menthol helps reduce the throat irritation caused by cigarette smoke", the Wall Street Journal wrote.

The latest report follows another report last week which suggested that the agency's Commissioner Scott Gottlieb is planning to announce new restrictions on the sale of some flavored vaping products in an effort to curb use among teens.

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The mooted ban, which could take up to two years to take effect, would be a massive blow for manufacturers of menthols such as British American Tobacco (BAT) and Imperial Brands.

BAT shares have lost almost 38 percent in value this year so far.

Steadily declining numbers of smokers paired with an increasingly hostile regulatory environment for tobacco products have troubled shareholders for some time now.

Imperial Brands Plc declined as much as 5 percent. Tobacco companies won an exception for menthol, the most popular flavored cigarette and the one preferred by black smokers, when a federal law banned other flavors in 2009.

According to analyst Michael Lavery, menthol cigarettes constitute 55 to 60 percent of the total volume of the purchased cigarettes, 25 per cent of global profits. The proportion is about 20 percent for Altria Group Inc., which sells Marlboro in that market, according to the firm.

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