In the U.S., of course, we have a new Republican-controlled Congress which may feel disinclined toward heavy regulation of the industry. That can’t be good news for anyone hoping that the Food and Drug Administration (FDA) will get the revised version of its deeming regulations out quickly – in fact, even leaving aside the shift of power in the Capitol (and the imminent presidential elections), we at ECigIntelligence think there is every chance that Deeming Regs 2 won’t be released before 2016.
That does not mean a lack of regulatory activity in the U.S., however. What it does mean – as our detailed analyses of individual states have repeatedly revealed – is that states and lower levels of government, such as counties and municipalities, are moving to fill the vacuum left by FDA inaction.
One of the most notable examples of this has come recently in California, where senator Mark Leno has introduced proposed legislation that would prohibit vaping in most public places – just as smoking has long been curtailed in the state, a tobacco control pioneer. And it’s important not only because California is the biggest and richest state with a potentially large e-cig market to match; as with tobacco regulation, its treatment of e-cigs could well provide a model for others to follow.
Previous attempts to regulate vaping in California have not been successful, so the fate of this one is far from assured, but Leno has a track record and the current governor is likely to be sympathetic.
Moreover, shortly before we went to press, an astounding broadside was launched by the state’s outgoing director of public health. Ron Chapman and his department all but declared war on e-cigarettes, in a pair of official reports that focused closely on the products’ purported health risks while repudiating their claimed benefits.
They want e-cigs to be brought into California’s tobacco regulatory framework, and hope for a campaign to spread information about toxicity and poisoning risks. Neither of those aims is hugely unusual: what was remarkable about these two reports was the sheer one-sidedness of their opposition to e-cigs. They amounted to a recitation of virtually every anti-vaping argument around, from the respectable to the ridiculous, while almost completely ignoring the potential upsides for public health.
Whether Chapman’s positions are maintained by his successor, or are simply parting shots, remains an open question. But combined with the Leno bill, they make California a possible site for major e-cig regulation that could set the tone for activity in other states. Meanwhile, the rest are hardly sitting on their hands either. Hawaii, Montana, New Mexico, New York, Washington and Utah are among those with e-cigs currently on the agenda.
While the U.S. may wait a long time for Deeming Regs 2, it seems that Europe will be feeling the effects of its equivalent, the revised EU Tobacco Products Directive (TPD), much quicker – despite a few legal challenges currently going through the system.
Indeed, the Netherlands has become the first country in the EU to enact interim legislation that goes some way towards implementing the TPD.
A decree that came into effect from the beginning of February is a strong indication of the approach Holland will take in its final legislation to implement the TPD. That final legislation will be enacted before May 2016 via amendment to the Netherlands’ Tobacco Act.
The decree, originally issued in November 2014, regulates e-cigs as consumer products, rather than medical ones; implements the e-liquid volume and nicotine concentration requirements of the TPD with immediate effect; restricts the ingredients and additives that can be added; and makes some requirements on child-proofing, instructions and warnings.
However, it only regulates the advertising of e-cigs to a minimal extent, far from the comprehensive ban that some had expected.
Indeed, there had been some confusion about a number of issues. For example, it does not implement the TPD, and does not mandate the use of “pure” ingredients. So the Dutch regulation of e-cigs is not only less final but also less draconian than it first appeared
It will ultimately be replaced by the legislation that implements the TPD. But we nevertheless feel that the Dutch government’s near-reversal on the meaning of significant language pertaining to the nature of permitted ingredients is noteworthy, and could influence language implementing the TPD – not only in Holland but also in other jurisdictions.
Laughing all the way to the treasury
The TPD and the majority of the measures being taken or considered in the U.S. are essentially about controlling product and marketing. But governments around the world are also waking up to the potential of taxing e-cigarettes, as discussed in a new report from ECigIntelligence.
Thus far, only Portugal, South Korea and two U.S. states – Minnesota and North Carolina – have successfully implemented e-cigarette taxation, although Italy is also in the process of implementing a new tax.
Most current proposed and implemented regimes take the form of either a percentage tax on the wholesale price of the product, or a flat-rate tax based on the volume of nicotine-containing liquid.
“We believe the concept of a flat-rate tax based on the volume of nicotine-containing liquid, as recently implemented in North Carolina and Portugal, represents a major step for the regulation of e-cigarettes given the relative ease with which such a tax can be imposed,” says Nick Wenbourne, director of ECigIntelligence’s regulatory analysis team and author of the report.
The better part of valour?
With all that in mind, is it any wonder that after pharmaceuticals giant GlaxoSmithKline considered bringing its own e-cigarettes to market it decided that the category is “just too controversial”?
“We’ve decided we’re not going to play. We’ve consciously had a think about it but we’re not going to play,” CEO Andrew Witty said in a Reuters interview. “Of course, it’s definitely taken a bit of our market, no question at all – but there’s a lot of competition in that space anyway.”
He and a team had spent “a few days” considering entering the e-cigarette business before deciding against it, Witty added in an interview with Reuters.
GlaxoSmithKline (GSK), the world’s sixth-biggest pharma firm, is a major player in the global $3bn nicotine replacement therapy (NRT) market which some see threatened by e-cigs.
Top of the shops
And now the good news: the e-cig market continues to develop rapidly even if its first growth spurt is slowing.
In Britain, for example e-cigarettes were the fastest-growing product category in supermarkets during 2014, according to market researcher Nielsen.
Sales grew 49.5% by volume to 17.3m units, and 43.5% by value to around £122m ($190m), during the year.
In second place to e-cigs were sports nutrition products such as shakes and bars, with volume growth of 42.8%. “Free-from” products such as dairy-free and gluten-free foods rose 15.4%, and bottled water 8.2%.
It’s striking how e-cig sales seem to relate to a broader consumer interest in healthier products both novel and established, including sports nutrition, free-from foods, and bottled water.
It will now be intriguing, too, to see whether the big supermarkets increase the number of e-cig brands they are stocking and the exposure they are given. Our research this autumn revealed wide variance in the range on offer, for example with Tesco (Britain’s biggest retailer) selling seven out of ten brands we studied, while upmarket Waitrose stocked just one.
And finally: some hard money supporting a trend we’ve been observing for a while – e-cig manufacturers emphasising “made in Europe” or “made in the USA”, which may be shorthand for “not made in China”.
Europe’s largest outsourced manufacturing facility for nicotine products is Nerudia’s new location in Liverpool. Producing nicotine extract for use in products including e-liquids and e-cigarette capsules, and with filling machinery on-site, it has a capacity of up to 2m e-liquid bottles per month.
The facility has already secured a “major” manufacturing contract and is in discussions over several others.
– Freddie Dawson, Barnaby Page and Nick Wenbourne ECigIntelligence staff
Photo: Iryna Yeroshko