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Monthly Archives: February 2011

Tobacco Industry Sues FDA On Proposed Menthol Cigarette Ban

Lorillard Inc and R.J. Reynolds Tobacco Co have filed a lawsuit against the FDA (Food and Drug Administration) saying there were conflicts of interest and bias among members of an advisory panel which may recommend cigarette-store.biz/cigarettes-news/tobacco-manufacturers-are-against-menthol-cigarette-ban.

The FDA advisory panel’s recommendations are not binding, however the agency usually goes along with its advice. Panel members are expected to put forward their recommendations regarding menthol-flavored cigarettes on 23rd March this year.

Nearly 1 in every 3 cigarettes sold in the USA is mentholated. R. J. Reynolds sells a cigarette-store.biz/online/camel version as well as the Kool brand, while Lorillard’s Newport brand is the number one menthol cigarette seller in the country.

Legislation was passed in 2009 giving the FDA the power to decide over tobacco products, such as cigarettes, pipes and cigars. The agency banned fruit, chocolate and other flavored cigarettes, which were thought to be aimed at getting children to smoke.

The new law asked the FDA to get a panel of outside experts to look into the health and social aspects of menthol cigarettes before deciding on whether to ban them.

Three panel members are accused of having severe financial and appearance conflicts of interest and associated biases, according to the lawsuit.

Pharmaceutical companies have financially rewarded three advisers for consultation work and research – these companies make products that to help people give up smoking, the lawsuit claims.

Two more members of a panel subcommittee have appeared as expert witnesses in suits against cigarette makers, the suit also claims.

Those wanting to prevent children from ever starting to smoke say the lawsuits are frivolous attempts to derail much needed legislation.

In an online communiqué, Matthew Myers president of the Campaign for Tobacco-Free Kids says this latest suit is an act of panic. He accuses the tobacco companies of fearing that the committee will recommend effective actions that either undermine or completely destroy a very lucrative market for menthol cigarettes, “Once again, they are putting profits ahead of lives and health.”

Myers says the lawsuit is groundless. The advisory committee was legally set up in accordance with the 2009 legislation. The evidence is compelling that the presence and availability of menthol cigarettes is linked to a higher incidence of smoking among children – the tobacco industry want to keep the evidence secret, Myers said.

Myers wrote:

It is critical to public health that the committee moves forward with issuing its menthol report on March 23, as required by Congress when it enacted the law giving the FDA authority over tobacco products.

A 2009 study by scientists at the University of Medicine and Dentistry of New Jersey found that menthol cigarettes are harder to give up, especially among African-Americans and Latino smokers. (Link)

Bby Christian Nordqvist
Medical News Today

Cigarette ban on minors intensified

PUERTO PRINCESA CITY, – The Sangguniang Panlalawigan, Palawan’s provincial legislative body, passed recently a resolution urging the Department of Trade & Industry, Department of Health, local government units and other concerned agencies to strictly enforce the law against selling of cigarettes and intoxicating drinks to minors.

The resolution authored by Provincial Board Member Ernesto Llacuna seeks to put some teeth into the law particularly sections 9 & 10 of the Tobacco Regulation Act of 2003. Based on reports he has been receiving, cigarettes are still being sold to minors and there are minors seen smoking.

The resolution which was unanimously approved and signed by Palawan Governor Baham Mitra, recommends the review of the implementation of the law in the local scene and the strengthening of its enforcement.

The goal of Republic Act 9211 or the Tobacco Regulation Act of 2003 is to regulate the use, sale and advertisements of tobacco products to promote a healthful environment and protect the citizens from the hazards of tobacco smoke, and at the same time ensure that the interest of tobacco farmers, growers, workers and stakeholders are not adversely compromised. This includes protection of the youth from being initiated to cigarette smoking and tobacco use by prohibiting the sale of tobacco products to minors.

BAT Profit Rises

LONDON—British American Tobacco PLC, the world’s second-biggest tobacco group by revenue, Thursday posted a rise in full-year profit on higher sales, boosted by growing demand in its emerging markets, but volumes fell as smokers struggle with tough global economic conditions.

“Some emerging markets are now showing strong economic growth and even developed markets are returning to growth, yet unemployment remains stubbornly high in many parts of the world and disposable incomes are still under pressure,” said Chief Executive Paul Adams. Chief Operating Officer Nicandro Durante will succeed Mr. Adams, who is retiring, as CEO next month.

Smokers in more mature markets are switching to low-cost brands as spending power is hit by tax hikes and other measures to help governments rein in borrowing. BAT volumes were also hit by an increase in illicit trade in markets like Turkey, Romania and Malaysia. To compensate for volume falls, tobacco companies are paring costs and raising prices in mature markets like Western Europe and the U.S.

“There is no doubt that consumer disposable income has been under pressure. We are seeing some downtrading,” said BAT’s director of corporate and regulatory affairs, Michael Prideaux. Still, he said “pricing was very good in the last year.”

BAT recommended a total dividend of 114.2 pence a share, up 15%. It also resumed its share buy-back program this year with a value of up to GBP750 million, after suspending the scheme in 2009 during the economic downturn.

“There will be further global economic challenges ahead but we can see strong opportunities for growth too. That’s why I am confident we can continue to deliver superior shareholder returns in 2011 and beyond,” Chairman Richard Burrows said in a statement.

London-based BAT, with brands such as Dunhill, Kent, Lucky Strike and Pall Mall, said net profit rose to £2.88 billion in the year to Dec. 31 from £2.71 billion a year earlier. Earnings per share on an adjusted and diluted basis came to 175.7 pence, up 15% from 153.0 pence and ahead of a consensus forecast of 174.2 pence. Sales increased 5% to £14.88 billion from £14.21 billion, driven by pricing momentum, a favorable U.S. dollar, Australian dollar and Canadian dollar against the British pound, and the contribution of the Indonesian acquisition of PT Bentoel Internasional Investama in June 2009, but were below a market consensus forecast of £14.91 billion.

At 1532 GMT, BAT shares were down 28 pence, or 1.2%, at 2385p in a slightly lower London market. The numbers were generally in line, but investors will be disappointed by both the cautious outlook and the value of the share buy-back falling short of some expectations, an analyst said.

The company, which competes with U.S.-based global market leader Philip Morris International Inc. and U.K.-based peer Imperial Tobacco Group PLC , said total volumes fell 2% to 708 billion sticks from 724 billion last year. Durante forecast total industry volumes to fall 2.5% this year, excluding China, but expects BAT to beat the average slightly and make market share gains.

Global brand volumes rose 7%, with Dunhill up 18%, Lucky Strike rising 2% and Pall Mall increasing by 8%. Kent fell 1% due to declines in its main markets. Asia-Pacific volumes rose slightly, but volumes in the Americas and Western Europe fell.

BAT said it is on track to reach an operating margin target of 35% by 2012 after it rose to 33.5% from 31.4% last year, supported by production, supply chain and logistical savings of £327 million.

Separately, Mr. Adams, in his last earnings presentation, said he expects the Australian government to rule next year on its proposals to introduce generic packaging, but warned BAT is ready to challenge the decision, adding that intellectual property laws in some countries will help BAT to fight “more vigorously than perhaps we can do so in Australia.”

The company is also lobbying against a ban on the display of tobacco products at retailers in the U.K., which has gone to a judicial review.

Earlier this month, Imperial, the fourth-biggest tobacco group globally, posted a rise in first-quarter sales and volumes boosted by its emerging market operations. Philip Morris also posted top line and volume growth in the fourth quarter, helped by gains in Asia.

By SIMON ZEKARIA

Holding the line on hookah bars

Two years ago, Oregon’s Smokefree Workplace Law removed smoke from some of the last places where smokers felt at home (taverns, bowling alleys and bingo halls). We celebrated the moment. It was a landmark for longer lives and healthier lungs.

At the same time, though, the law made room — appropriately, in our view — for a few nooks and crannies where smoke could legitimately linger.

Ceremonial use of tobacco by Native American tribes is permitted, for instance. So are some state-certified businesses devoted to tobacco sales and sampling, including some cigar bars and smoke shops. Since then, the proliferation of one such shop, the hookah lounge, has health advocates worried.

Hookah bars put a sweet, soft, even multicultural gloss on what is still essentially the injection of poison into lungs. An estimated 15 to 20 of these establishments are doing business in Oregon now, and they’re extremely popular with college-age youth.

They go to hookah lounges to smoke tobacco from a waterpipe, shared with friends. Let’s stop here and acknowledge that the fad’s popularity may be directly related to the crackdown on smoking in most other Oregon workplaces. That has isolated smokers, driven them outdoors and, in some cases, virtually into hiding. Against this backdrop, the hookah lounge takes on an elevated meaning. Instead of an addictive habit indulged in private, the lounge elevates it to an exotic ritual. (Collecting around the shared pipe stems back hundreds of years to smoking traditions in Egypt, Syria, Turkey and India.)

Likely even as we speak, some young Oregonian somewhere is trying to convince a parent that a hookah habit is a good thing. Nonsense. True, the tobacco is flavored with syrups, smells sweet and is inhaled through water. That means it does not physically sting the way inhaling a cigarette can, making a smoking habit that develops in this way all the more insidious.

No one should be under the illusion that hookah lounges are health-promoting establishments. Still, the fact remains that these are legal businesses. People 18 or older have every right to frequent them. Today, there will be a hearing in Salem on House Bill 2726, which essentially aims to shut hookah lounges down.

The new law would permit only four seats in these lounges. Smoking would be allowed “only for the purpose of sampling tobacco products for making retail purchase decisions.” The clear purpose of this proposed legislation is to undermine the sociability at the very heart of the hookah business model.

This law is not the way to go. It would unfairly target businesses that have invested tens of thousands of dollars. In opening their doors at all, some have already endured regulatory run-arounds amounting to harassment.

Meanwhile, hookah use is increasing, particularly among adolescent girls. It is skyrocketing also wherever hookah lounges are close at hand. Eighteen-year-olds don’t always make the best choices, and wherever they are drawn, kids younger than 18 long to go.

The very names of hookah products (“Skittles,” “Pink Lemonade”) testify to the aspiration to entice the young. There is no question that Oregon needs to keep a close eye on this fad, which has serious implications, globally, for public health.

But health advocates also need to fight fair, with education and targeted enforcement. Oregon should not aim to slam business doors, but to open more minds to the facts.

Oregonlive.com

Displaying tobacco in shops should be consigned to history

The government will soon decide whether cigarette displays in shops should be banned. Health campaigners insist they should, believing this will reduce the number of young people smoking, while those who run convenience shops oppose the move, saying it will cost up to £1,000 to remove the displays and to fit under-the-counter trays to hold tobacco products. This, they warn, will increase queues in shops, levels of theft and smuggling.

Whether a ban deters young people from smoking is fiercely contested. Several Canadian provinces that introduced a ban have witnessed a significant fall in youth smoking. But provinces that did not introduce a ban have also seen falls.

What is clear is that in the Canadian example the smoking lobby vigorously resisted the move, advancing the same arguments against the ban now being made here, ostensibly by shopkeepers but with the tacit support, both financial and administrative, of the big tobacco companies.

The assertion that compliance with the ban will result in thousands of shopkeepers going out of business must be treated with suspicion. Even those who oppose the ban estimate the true cost of compliance will be only in the hundreds of pounds, a fraction of an average shop’s annual turnover.

Perhaps the most useful exercise for the UK government is to look to Ireland, which introduced a similar ban in 2009. Independent research confirmed that the ban did not result in a loss of income for Irish retailers, while there was a dramatic decline in children’s awareness that tobacco was sold in shops. Support for the ban also rose among the general population after it was introduced.

The researchers concluded the ban helped to “de-normalise” tobacco in the minds of children. The truth, long recognised by the tobacco industry, is that these displays are just another form of advertising and so, in the case of cigarettes, should be consigned to history.

Reynolds American and Niconovum

In the fall of 2009 Reynolds American engaged in one of the most intriguing acquisitions ever by a tobacco company when it purchased a smoking cessation firm based in Sweden, called Niconovum. Not only was this acquisition a seemingly contradictory one, but also one that confused many observers who were already well acquainted with Reynolds’ past acquisitions. Would this acquisition benefit shareholders by acting as a future hedge against declining cigarette sales volumes? Or would it dilute shareholder value by diverting excess free cash flow and manpower to a non-core business segment?

By looking at Jensen’s Theory of Free Cash Flow using two different approaches, an opinion can be formed as to whether Reynolds American’s acquisition of Niconovum has been successful or not so far.
nicinovum

Michael Jensen, a widely acclaimed professor at Harvard Business School, proposed in his 1986 paper entitled “Agency costs of Free Cash Flow, Corporate Finance and Takeovers” that companies that operate in low growth, high FCF producing industries are more likely to pursue value destroying mergers and acquisitions, as opposed to value creating mergers and acquisitions.

Value destroying mergers, he postulated, resulted in less FCF being available to distribute to shareholders in the form of dividends. These sorts of acquisitions usually occurred when companies attempted to diversify into other industries in which they had no prior management experience. To prove his theory, Jensen explored examples from the 1970s and 1980s in which large corporations operating in low growth, high FCF producing industries acquired companies in different business lines in an attempt to diversify. Recent examples of acquisitions consistent with Jensen’s theory include Daimler – Chrysler and AOL – Time Warner, both of which resulted in hundreds of millions of dollars in losses for shareholders.

Why the acquisition is consistent with Jensen’s Theory:

Reynolds American, as the second largest tobacco company in America, is undoubtedly facing headwinds due to the fact that cigarette sales are continuing to decline in developed markets. However, despite operating in a low growth industry, Reynolds is still managing to produce large amounts of FCF.

Well, I mean, this business is really all about, you know, watching the marketplace, watching the market share and generating cash for our shareholders. As you know, we generate about $1.4 billion in free cash flow for a year.

– Thomas Adams, Chief Financial Officer, October 25th 2010

Upon acquiring Niconovum in 2009, Reynolds asserted that it would look to integrate Niconovum’s smoking cessation therapy business into its strategy of ‘total tobacco’. Since the deal closed there has not been any information released from Reynolds American detailing how much revenue the proposed Niconovum operating unit will bring in or how much it will cost to operate.

Earnings associated with the Niconovum unit have been lumped into the ‘all other’ category, which also includes the much larger Santa Fe tobacco company subsidiary. By looking at the segment data, it is difficult to determine the impact of Niconovum on Reynold’s overall cash flow. For the nine months ended September 30th, income is up as opposed to the previous year, but when looking at the quarter ended September 30th as opposed to the previous year, earnings are down.

Trying to determine corporate value from an acquisition is difficult and also not tied directly to the generation of cash flow; however, by looking at the most recent numbers, it seems that Niconovum has not had a substantial impact on FCF generation at Reynolds.

In the most recent third quarter earnings conference call, neither the acquisition of Niconovum, nor any strategy involving smoking cessation products, was discussed by management or questioned by industry analysts. When the acquisition of Niconovum was first announced back in the fall of 2009, Reynolds American stated that it was interested in pursuing opportunities in the smoking cessation market and that with additional investment into Niconovum and its patented proprietary nicotine deliverance technology, it could become the world’s most efficient smoking cessation brand.

Although smoking cessation offers an additional source of revenue for Reynolds American, the acquisition of Niconovum does not appear to offer a substantial return on value for Reynolds. Expansion of the Niconovum brand into America would take 4 -5 years at the earliest, and would require capital intensive research studies to prove its effectiveness to the FDA. The fact that Reynolds American lacks an international presence will prevent them from obtaining synergies as a result of this acquisition as all of Niconovum’s operations are located in Sweden and Denmark, far from any of Reynolds’ distribution networks.

Since the acquisition, FCF figures and operating income have been difficult to determine for Niconovum. Management has not discussed the acquisition, the status of its “total tobacco” strategy in relation to Niconovum or any sort future plans regarding introduction of Niconovum products to new markets. With $45 million spent on the acquisition that could have been distributed to shareholders in the form of dividends and little progress to show for it, it would appear that Reynolds American’s actions are consistent with Jensen’s theory of FCF.

Why the acquisition is not consistent with Jensen’s Theory:

One of the main tenets of Jensen’s Theory of Free Cash Flow states that companies with large free cash flows that operate in low growth industries will waste free cash flows on value destroying acquisitions, most often in businesses with which they do not share core competencies. Reynolds American acquired Niconovum in 2009 as part of a specific “total tobacco” strategy implemented by CEO Susan Ivey, which stated that Reynolds’ goal, given the declining nature of cigarette sales, would be to become a diversified tobacco company engaged in the production of smokeless tobacco, smoking tobacco and, as of 2009, smoking cessation products.

Reynolds’ acquisition of Niconovum is part of a clear strategy aimed at investing in tobacco related industries and thus does not represent an acquisition outside of the tobacco industry that Jensen would categorize as value destroying.

According to Michael Jensen, one of the reasons for failures in diversification strategies is the lack of experience that acquiring managers have in the industries of the companies they are acquiring. Outside of naming a former marketing manager as President of Niconovum USA, Reynolds has done nothing to alter the management structure at Niconovum. Reynolds’ decision to leave Niconovum’s management intact will allow Niconovum to continue growing organically and through an existing management structure, thus allowing Reynolds to avoid the pitfalls of inexperienced management that have often, according to Michael Jensen, led to failed acquisitions and decreases in corporate value.

During 2009 RAI entered a new product category with the acquisition of Niconovum AB. Nicotine-Replacement therapy products are a small category with good potential for future growth. These products also align with public health objectives. Like RAI’s other companies, Niconovum’s strength is in its superior technology and innovative products that will offer more you appeal to consumers than existing products. Over time Niconovum plans to expand its product line and enter additional markets.

Susan Ivey

Reynolds American’s acquisition of Niconovum represents a targeted growth strategy aimed at diversifying Reynolds’ sources of cash flows to help protect the company against the declining cigarette market. Niconovum has already proven itself as a company with a strong brand and product in both Sweden and Denmark and will provide an additional stream of revenue for Reynolds. With Reynolds as a source of capital, Niconovum will be able to continue producing superior smoking cessation products and maintain its position as one of most advanced smoking cessation companies in Europe.

Not only will Reynolds provide adequate capital needed for product expansion and research but they will also provide a valuable distribution and marketing network along with a top notch legal team that will lead Niconovum into the American smoking cessation market. Due to various factors, Reynolds American’s acquisition of Niconovum does not fit the profile for a value destroying merger per Michael Jensen’s Theory of Free Cash Flow.

One of the most interesting aspects of Reynolds’ acquisition of Niconovum is its ability to hold the fate of a smoking cessation business in its hands. With its $45 million investment, Reynolds not only acquired proprietary technology and a market presence in Sweden and Denmark, but also a piece of mind in knowing where, when and if it would ever enter new markets with its smoking cessation products. Given the fact that the margin on cigarette sales in undoubtedly higher than the margin on smoking cessation products, It can be suggested that this power alone could be saving Reynolds millions of dollars a year in FCF as a result of keeping customers smoking as opposed to getting them to quit.

While compelling arguments exist both for and against classifying this acquisition as value destroying, prudence suggests that more time is needed to fully understand the implications of the transaction on Reynolds shareholders before passing judgment.



Farmers to Get Cash for Tobacco in Zimbabwe

TOBACCO farmers are now getting a cash payment for almost all their deliveries after the Reserve Bank of Zimbabwe increased the cash payment threshold from US$2 000 to US$10 000 per sale.

Tobacco Sales Floor general manager, Mr James Mutambanesango confirmed the new cash threshold.

“RBZ has released a circular directing that the threshold be increased to US$10 000 per sale and that the threshold could be increased by another US$1 000 as the season progresses,” he said.

With tobacco selling at an average of US$2,56 per kg so far this season, farmers who deliver less than 4 000kg of the golden leaf at once, would get their payment in cash.

The US$10 000 threshold applies per every single sale made and farmers with more than 4 000kg can split their sale into two within the same day and still get US$10 000 per sale.

The next sale is not affected by the cash payment made for the previous sale.

The cash threshold makes it easy for mainly the small scale farmers with no bank accounts who have a previous record of spending nights on end trying to cash their cheques before going back to their farms.

There are, however, a few farmers who can deliver 4 000kg per season, let alone at a time.

Producing one hectare of commercial tobacco costs between US$8 000 and US$10 000, everything being done according to the book.

This means that to really make money farmers have to improve their yield levels per hectare and the same applies for all crops.

For instance, a farmer needs 14 bags of fertiliser at US$30 per bag, a standby generator, which requires 1 000 litres at US$1,40 per litre, two tonnes of coal at US$300 each, labour at US$100 per worker per month, among other costs like curing, handling and transport.

Dry land tobacco produces an average of 2 500kg per ha while irrigated tobacco produces an average of 4 000kg per ha and the price per kg is determined by the quality, which subsequently determines the profit margin.

Farmers’ Development Trust executive director Mr Lovegot Tendengu confirmed the figures.

“Yes, it costs about US$10 000 per ha, per average, everything being done properly with farmers getting a yield ranging from 2 500-4 000 kilogrammes per hectare,” he said.

“Zimbabwe has a good quality crop and farmers should get cigarette-store.biz/cigarettes-news/new-prices-new-brands-in-our-online-cigarette-store. We also want to retain our position as one of the best producers of flue-cured tobacco,” Mr Tendengu said.

Tobacco Association of Zimbabwe first vice president Mr Guy Mutasa said the prices being offered at the floors this year were good and were expected to increase as the quality of the crop improved.

Farmers start by reaping the lower leaves which are normally of low quality and sell them to offset harvesting costs. They then sell the good quality as the season progresses, alongside the late reap.

Tobacco growers yesterday said they were happy with the improvements on service delivery at TSF including registration, auctioning and payment methods.

Marondera farmer Mr Nhamoinesu Mudhombo said he was satisfied by the service at the auction floors, especially the absence of long queues.

“I came yesterday and today my tobacco has already been bought. The process is a bit faster unlike the previous year.

“Last year I spent more than three days here, which was very expensive and I did not have the money,” he said.

Headlands farmer Mr Misheck Dick said he was happy in that there had been an improvement in the availability of tobacco wrappers.

“Last year we had problems with the packaging material which was constantly in short supply but this season we are buying on the open market and this is cheaper,” he said.

Despite the arrangement that farmers deliver their crop only after booking, some growers, especially the small ones, are still coming with their crop without having made prior arrangements.

Mr Mutambanesango said TSF and the Tobacco Industry Marketing Board agreed to set up an office at the sales floor to book such farmers.

“Booking is being done between 6am and 12 midnight to ensure all farmers who deliver their crop are able to sell the next day.

“Still there is no reason for one to stay at the floors. We have accommodation for farmers but they have to give good reasons for them to stay over at the floors,” Mr Mutambanesango said.

Elita Chikwati And Faith Mhandu
Allafrica

Philip Morris gearing up for June fight over cigarette tax

Tobacco giant Philip Morris USA is gearing up for a potential June ballot measure fight over cigarette taxes, reporting more than $128,000 in contributions to a new campaign account this month.

The measure in question – which would increase the cigarette tax by $1 a pack to fund cancer research and prevention programs – is currently slated for the February 2012 ballot. But a proposed June statewide special election to ask voters to extend sales, income and vehicle tax rates set to expire would bump up the California Cancer Research Act and another previously qualified initiative to alter legislative term limits.

The company reported last week four separate non-monetary contributions totaling $128,115.99 to a campaign account called “Taxpayers Against Out-of-Control Spending.” The contributions were made in early February when the account to oppose the ballot measure was first established, according to campaign finance reports.

David Sutton, a spokesman for Philip Morris parent company Altria Group, said the committee was created “so that we may explore and evaluate our options regarding this measure.”

“We oppose additional targeted taxes on tobacco,” he said in an e-mail.

Gov. Jerry Brown wants lawmakers to act by March 10 to approve putting the tax extension to a statewide vote, triggering a June special election. Two of three committees created in support of the cigarette tax measure have also kicked into action in recent weeks, reporting a combined $60,000 in contributions since Jan. 1.

Study Shows Tobacco Retail Proximity to Schools

BUFFALO, N.Y. — For years the tobacco industry has argued that efforts to ban tobacco advertising near schools would constitute a total ban on tobacco advertising in urban areas.

But public health researchers at the University at Buffalo and Roswell Park Cancer Institute have presented research that shows this is not the case in Buffalo and Niagara Falls, N.Y. The UB and RPCI researchers presented their study results in a poster session on Feb. 18 at the annual meeting of the Society for Research on Nicotine and Tobacco held in Toronto.

They found that tobacco outlets in Buffalo and Niagara Falls are more concentrated around elementary and secondary schools; the outlets (convenience stores, groceries, delis, etc.) also are more densely concentrated in lower-income areas, which may be exacerbating tobacco-use disparities between socioeconomic groups.

According to the tobacco industry’s argument, the area around schools in urban areas comprises a significant percentage of land area and population that would be off-limits to tobacco advertisements if an advertising ban were in place.

“The tobacco industry has stated that a tobacco advertising ban within a 1,000-foot buffer zone near schools in urban areas would be equivalent to a total ban on advertising and would, therefore, be unconstitutional on First Amendment grounds,” explains Andrea Licht, a doctoral candidate in the Department of Social and Preventive Medicine in the UB School of Public Health and Health Professions. Licht is first author on the study.

“However, based on our analyses, a law banning tobacco advertising within 1,000 feet of schools would affect fewer than half of their outlets,” she says. “We also found that only about one-third of the population potentially lives within this 1,000-foot buffer zone, so such an advertising ban would not act like a ‘de facto’ ban, as industry has claimed.”

During 2009-10, the years covered by the study, there were 350 tobacco retail outlets and 104 schools located in the City of Buffalo.

The study found that 17.3 percent of schools in Buffalo have a tobacco retail outlet located within 500 feet, while 49.9 percent have a tobacco retail outlet located within 1,000 feet and 71.2 percent of schools have a tobacco retail outlet located within 1,500 feet.

In the City of Niagara Falls, there were 65 tobacco retail outlets and 15 schools. Of those 15 schools, 13.3 percent have a tobacco retail outlet located within 500 feet, 33.3 percent have a tobacco retail outlet within 1,000 feet and 46.7 percent of schools have a tobacco retail outlet within 1,500 feet.

“The proximity to schools is significant because smoking patterns are almost exclusively developed during the adolescent and teen years,” Licht explains.

“These outlets near the schools and in lower-income areas may be more likely to be frequented by adolescents, young adults and other disadvantaged populations,” says Licht. “Since availability, accessibility and the perception that smoking is normal are all associated with higher youth smoking rates, it is likely that advertising bans near schools may serve to reduce youth smoking initiation.”

Tobacco outlet information for the study was collected and analyzed at RCPI for, and with, the help of the Erie-Niagara Tobacco-Free Coalition.

Co-authors with Licht on the research are Anthony G. Billoni, director of the Erie-Niagara Tobacco-Free Coalition; K. Michael Cummings, PhD, UB professor in the Department of Social and Preventive Medicine and chair of the Department of Health Behavior at RPCI; Andrew J. Hyland, PhD, UB research associate professor in the Department of Social and Preventive Medicine and associate member in the Department of Health Behavior at RPCI; and Deborah Pettibone, media specialist with the Erie-Niagara Tobacco-Free Coalition.

The University at Buffalo is a premier research-intensive public university, a flagship institution in the State University of New York system and its largest and most comprehensive campus. UB’s more than 28,000 students pursue their academic interests through more than 300 undergraduate, graduate and professional degree programs. Founded in 1846, the University at Buffalo is a member of the Association of American Universities.

ByEllen Goldbaum: goldbaum@buffalo.edu, 716-645-4605

World watches Australia’s tobacco fight

The world is watching as Australia goes into battle with big tobacco over making cigarette packets plainer, uglier, and uncool.

Later this year, the Federal Government is hoping to force all cigarettes to be sold in plain packaging.

The latest tobacco products directive in the European Union is now being revised, and researcher Dr Crawford Moodie from Scotland’s Stirling University says if plain packaging is successful in Australia, other countries will follow.

“Really, the eyes of the world will be on what happens in Australia,” he said.

Once plain packaging takes effect, colours, brands, logos and promotional text on cigarette packets will all be banned.

The packet will be covered by a graphic health warning and it will probably be coloured brown.

Public health experts believe it will make cigarettes less appealing to young people and curb smoking rates, which currently stand at 17 per cent.

The latest Citigroup research suggests on present trends smoking will die out in Australia by 2030, only two years before Sweden, and a whole decade ahead of the UK.

Public health Professor Mike Daube says he hopes the commercial sale of cigarettes will come to an end in the next decade.

“I think we’re going to see a time where cigarettes can only be obtained from certain sales outlets, and possibly over time only with some kind of sign off that these people are registered smokers,” he said.

Big tobacco fight

Big tobacco will vigorously fight against this move.

A large-scale campaign by the cigarette companies is already underway.

The director of corporate and regulatory affairs for British American Tobacco Australia, Mark Connell, says it will end in the courts.

“We will defend to the end. It means unfortunately an argument in the courts to defend our rights to keep our brands and trademarks,” he said.

British American Tobacco has 45 per cent of the cigarette market in Australia.

Mr Connell says plain packaging will diminish their ability to compete against other brands.

“We want our consumer that decides to smoke, knowing the risks, when they purchase the product, we want them to purchase our product,” he said.

He says he does not believe smoking should be eliminated.

“At the end of the day we are a legal company, we’re selling a legal product.”

Political support

Labor stopped accepting political donations from the cigarette companies in 2004.

Coalition parties last year received nearly $300,000 from the tobacco industry.

It is something that sits uncomfortably with previous Opposition leader Brendan Nelson.

He says during his time in politics, plain packaging was never on the agenda, but he is a passionate supporter of the policy and has been advocating for it since the 1990s.

Background Briefing reveals Dr Nelson was reprimanded by senior Liberal Party figures after calling on his colleagues to refuse tobacco sponsorship of the Liberal Party’s annual conference in 1998.

Peter Wilkinson, director of PR agency the Wilkinson Group, used to be a 60 Minutes reporter and says Dr Nelson told him in a private conversation that he was put in the “naughty corner” because of his stand.

“[He] was told very firmly told not to misbehave by speaking out of turn,” he said.

Dr Nelson does not deny Wilkinson’s recollections, but says commenting now on whether he was reprimanded would compromise his current position as a diplomat.

Dr Nelson says tobacco’s most frustrating tactic was the use of third-party endorsers.

“I wasn’t debating the chairman of Philip Morris, or the CEO of the tobacco institute. I’d have the debate with the chairman of the rugby league or the coach of the under-nines,” he said.

He says he expects retailers to take up the fight on behalf of the cigarette companies.

Last year during the federal election, the Alliance of Australian Retailers (AAR) launched a campaign against plain packaging.

But it came to an abrupt end when leaked documents revealed big tobacco was funding the alliance and a PR group was pulling the strings behind the scenes.

Retail revolt

Background Briefing reveals the AAR has reformed and will launch its second round of anti-plain packaging campaigning within a matter of days.

AAR spokesperson Craig Glasby says the policy must be stopped.

“It’s an ongoing campaign and we’re committed to continuing until the policy is overturned,” he said.

Mr Glasby says they are about to publish advertisements in regional papers and release a research paper to prove that small businesses will be damaged if plain packaging is introduced.

He also hopes to meet with Federal Health Minister Nicola Roxon and the Prime Minister to discuss his concerns.

The campaign this year will focus on the tensions between small retailers and the big supermarkets such as Coles and Woolworths.

Mr Glasby hopes local communities will find it easier to sympathise with hard-working small businesses rather than the two big giants.

“This is actually not a fight against anybody but Coles and Woollies. They’re our real enemy because they don’t fight fair,” he said.

Woolworths emailed Background Briefing a statement in response, saying the AAR is a front group for big tobacco and its concerns should be disregarded.

“Obviously the alliance is a thinly veiled front for BATA (British American Tobacco Australia) with all their resourcing and funding behind it,” he said.

British American Tobacco has confirmed they will fund the AAR’s campaign this year.

“I don’t have figures, we will be supporting them substantially.”

E-cigarettes questions unanswered

Jeff Mann has found a way to get his nicotine fix with no ash, no flame, no odor and no bad breath.electronic  cigarette

And he can do it legally inside businesses that are smoke free.

Mann, 40, smokes an electronic cigarette. It’s a battery-powered device that looks like a cigarette and emits cigarette-like smoke, but delivers nicotine in vapor form.

“You can get a nicotine level that you’re used to getting from a regular cigarette,” Mann said.

E-cigarettes have been available in the United States since 2006 and have grown in popularity in Sioux Falls since the smoking ban went into effect Nov. 10. They’re sold in bars, casinos and various retail shops. At least one local distributor has seen a 50 percent increase in sales.

But the federal Food and Drug Administration has not approved e-cigarettes. That raises red flags for some health professionals and has them questioning what risks might be associated with e-cigarettes.

Smoker says device helped him cut back

The FDA lost a court case last year after trying to treat e-cigarettes as drug-delivery devices instead of tobacco products because e-cigarettes heat nicotine extracted from tobacco.

But Mann, who owns Vishnu Bunny Tattoo and Piercing, views e-cigarettes as a healthier alternative to the traditional cigarettes he has smoked for 25 years. He said it has helped him cut down on smoking.

Prices range from less than $10 for disposable e-cigarettes to $100 for a kit with a lifetime warranty.

Critics say flavors can entice children

Users can buy cartridges with varying levels of nicotine, all the way down to a cartridge containing no nicotine. They also come in flavors such as chocolate and vanilla, which critics say can tempt children.

Because e-cigarettes are not FDA-approved, Dr. Jeffry Meyer of Sanford Health hesitates to tell patients it’s OK to use them.

“We rely on the FDA to research and give good advice,” Meyer said. “We believe they have good reason for coming out against something … there may be some potential harm or abuse potential.”

Deb Murray, a respiratory therapist at Avera Heart Hospital, heard about e-cigarettes a year ago but said patient interest peaked in November.

Murray is concerned about the mystery of what is in e-cigarettes.

E-cigarettes are advertised as a healthy alternative, and companies say they lack the carcinogens found in tobacco products.

“(People are) thinking it is a healthy alternative, but they need to be aware of the unknown nicotine amount, the unknown health effects and that they are not FDA approved,” Murray said. “There may be chemical contents that might affect their health. There are so many unknowns.”

The American Cancer Society also does not endorse or suggest people use e-cigarettes, said Jennifer Stalley, director of government relations for the American Cancer Society in South Dakota.

Sellers find raidly rising market

Kristi Englund, 45, has not smoked a traditional cigarette in three months, and she credits e-cigarettes. After smoking for 30 years, Englund said she’s tried other methods for quitting, but nothing worked.

“This is great. It stops that craving for inhaling, which is my big thing,” she said. “The inhaling is a stress reliever.”

Mike Wehrkamp, owner of M & M Distributing, has seen a 50 percent increase in sales of Fifty-One electronic cigarettes since the smoking ban went into effect Nov. 10. He distributes e-cigarettes to about 12 Sioux Falls retailers, and 25 retailers statewide.

He started distributing Fifty-One electronic cigarettes in May 2009.

“I thought it was a great opportunity,” Wehrkamp said. “When I first got into them, I figured, if this ain’t the wave of the future …”

Gregor’s Eastside Liquor has seen a 30 percent increase in Fifty-One electronic cigarette sales the smoking ban, owner Greg Stahl said.

A Fifty-One electronic cigarette kit sells for $100, and comes with two lifetime warrantied batteries, a cell phone-like wall charger and two cartridges, which are screwed onto the batteries.

The refill packs cost $20, and come with five cartridges, which Wehrkamp said is equivalent to a $50 carton of cigarettes.

“These are like your cell phone. You recharge them, they go forever,” Wehrkamp said.

Still, for longtime smoker Kay Johnson, 49, an e-cigarette is not the same as a traditional cigarette.

“The e-cigarette doesn’t give me the same effect. It helps abate the sensation, but it’s not the same,” she said. “It helps to quench your thirst, but that’s it, and not for long.”

By Sarah Reinecke: 331-2326

Japan Tobacco Aims to Boost Overseas Profit 10%

Japan Tobacco Inc., the world’s third-largest publicly traded cigarette maker, aims to boost overseas profit at least 10 percent as a tax increase damps demand at home.

Japan Tobacco plans to increase sales in countries including Russia, Yasushi Shingai, executive vice president of the JT International SA unit, said in an interview on Feb. 10 in Tokyo, where the company is based. The cigarette maker will focus on its more profitable brands including Mild Seven and Winston, he said.

The company is targeting profit growth in Russia even as the country seeks to crack down on smoking through an advertising ban and higher taxes. Eastern Europe including Russia is the biggest overseas market for Japan Tobacco, accounting for 48 percent of its international unit’s sales volume in 2010, the company said Feb. 7.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, for Japan Tobacco’s international business rose 7.7 percent in dollar terms, based on constant rates of exchange, last year after gaining 15 percent in 2009, Japan Tobacco said last week.

The company had a 37 percent market share in Russia. Japan Tobacco also aims to expand sales in the Middle East and North Africa, Shingai said.

Japan Tobacco rose 0.5 percent to 335,000 yen at the 3 p.m. close in Tokyo trading. The stock has advanced 11.5 percent this year, compared with a 4.9 percent gain in Japan’s benchmark Nikkei 225 Stock Average.
Domestic Sales

Net income for the year ending March 31 may decline 1.8 percent to 136 billion yen ($1.6 billion), Japan Tobacco said Feb. 7. The company expects domestic cigarette sales in the 12- month period will fall 12 percent after a tax increase in October pushed up prices. The average price of 20 cigarettes rose 37 percent to 410 yen on Oct. 1, according to the Tokyo- based Tobacco Institute of Japan.

The cigarette maker bought RJR Nabisco Inc.’s international businesses, including the cigarettespub.biz/camel and www.cigarettespub.biz/winston, in 1999 and the U.K.’s Gallaher Group in 2007.

By Naoko Fujimura in Tokyo: nfujimura@bloomberg.net; Shunichi Ozasa: sozasa@bloomberg.net

UA seeks to control its health care costs

FAIRBANKS – To control costs at the University of Alaska system, employees will be required to pay a higher health care deductible while the university system emphasizes generic drugs and adds a fee for tobacco users.

The changes are expected to take place July 1, reported the Fairbanks Daily News-Miner.

In December, a university consultant estimated that health care costs would more than double during the next seven years. The plan now costs the university system $65 million per year.

Cathy Cahill, Faculty Senate president at the University of Alaska Fairbanks, said employees are not surprised by the changes.

“There’s some sense of inevitability that things were going to go up,” Cahill said.

The sharpest change is in deductibles for employees on the system’s cheapest plan, who will see their deductible spike from $500 to $1,250. Those on the most expensive plan will see their deductible increase from $100 for an individual to $500.

Tobacco users will be charged an extra $50 per month under the modified plan. Also, the university system plans to fully pay for some generic prescription drugs in the future, while employees will need authorization to get some brand name drugs.

“(The University of Alaska’s) current health plan is no longer sustainable and doing nothing is not an option,” said new University of Alaska President Pat Gamble said in a Jan. 31 memo to faculty and staff members.

If the rise in health care costs didn’t raise many faculty eyebrows, a “dependent audit” of spouses and children certainly has.

The announcement of the audit didn’t reach the entire faculty — many learned they were being asked to account for their dependents by a letter in the mail.

Paperwork from the university asked for employees’ birth certificates, marriage licenses and tax forms.

The university system estimates that finding and removing ineligible dependents will save about $500,000.

View of the New Anti-Tobacco Campaign

ALBANY, NY – New York convenience store owners expressed dismay at the new taxpayer-funded media campaign announced today by the Community Partnerships for a Tobacco Free New York bemoaning tobacco displays and signage in licensed outlets.

“Sorry to spoil their conspiracy theory, but displaying cigarettes on the wall behind our counter doesn’t compel kids to smoke any more than displaying toothpaste on our shelves compels them to brush their teeth,” said James Calvin, President of the New York Association of Convenience Stores.

In their press release, the Community Partnerships for a Tobacco Free New York lamented, “It is not an accident that tobacco products are displayed in the most prominent location in stores…88% of stores statewide display tobacco products directly behind the counter.”

“That’s correct,” Calvin said, “because these same anti-tobacco crusaders lobbied for and passed a State law in 2002 requiring us to display tobacco behind the counter. Where do they want us to put it now – on the ceiling?”

While the release said the Community Partnerships were funded by the New York Tobacco Control Program, it failed to disclose that that program is publicly funded. “In other words, at a time when our State is in a $10 billion hole and hemorrhaging jobs, these folks are spending your tax dollars to badger retail businesses for displaying, inside their own privately owned premises, in accordance with state law, legal products they are licensed by the State to offer for sale to adult customers,” Calvin said.

“Most convenience store operators are responsible business people,” he continued. “As parents and citizens, they share the community’s commitment to preventing youth access tobacco. Through training, stringent policies and ID procedures, and supervision, they have helped dramatically reduce the incidence of underage sales in New York State over the past 10 years, as the state Health Department will attest.”

“We appreciate the work the public health community has done to reduce tobacco consumption over the years. But the virtue of that cause does not entitle them to spend your money publicly harassing responsible neighborhood retailers,” said Calvin.

Interest in privatization of Bulgartabac Holding

About a dozen strategic and financial investors have declared interest in the privatization of Bulgaria’s state cigarette producer bulgar tobaccoBulgartabac Holding, according to Economy Minister Traicho Traikov.

Unofficial information reported in the Bulgarian media says that the bidders seeking to purchase Bulgartabac include companies from Bulgaria, Greece, and South Korea.

Traikov has announced that next week the government will announce its decision on the privatization method – i.e. whether Bulgartabac will be sold through a tender, an auction, or on the Sofia Stock Exchange – will be decided in the coming weeks. It was proposed by Citibank, the consultant preparing the sale of the state company. The decision has already been made but Traikov has declined to reveal it yet.

If Bulgartabac is privatized through the Bulgarian Stock Exchange, the government will not be able to impose its criteria for the future owner of the cigarette giant.

Bulgartabac, whose state management has been questionable in the recent years, is being put on the privatization table after its privatization has been mulled for years.

In January, Finance Minister Simeon Djankov reiterated earlier announcements that Bulgaria’s government is determined to go ahead with the planned sale of the country’s tobacco company, the biggest military plant and the minority stakes in electricity distributors.

The sale of Bulgartabac Holding AD, Sopot-based Vazovski Mashinostroitelni Zavodi or VMZ, and the minority stakes in the electricity distributors have been said to be a must-do task in 2011 due to the sorry performance of the state-owned companies.

The Economy Ministry revealed in January that the consultant Citibank has made preliminary inquiries with about 100 potential strategic and financial investors from around the world with respect to Bulgartabac’s privatization in order to make sure that all “serious” investors that are not aware of the sale of the Bulgarian cigarette company.

According to the Ministry, there is a sufficient number of companies interested in the privatization of Bulgartabac because it is an attractive asset even in a time of crisis.

The Economy Ministry said it wants to find a buyer for Bulgartabac by the summer of 2011.

In spite of declarations in April 2010 that Bulgaria’s Privatization Agency hoped to complete the sale of state-owned cigarette monopoly Bulgartabac in 2010, no such deal went through by the end of December 2010.

The consultant for the Bulgartabac sale, Citigroup Global Markets Ltd, was picked by the Bulgarian government in February 2010.

Two of the less profitable plants of Bulgartabac holding – in the cities of Plovdiv and Stara Zagora – were sold in 2009 through the Sofia Stock Exchange – for BGN 31 M and BGN 18 M respectively; the holding still owns the two larger and more consolidated factories in Sofia and Blagoevgrad as well as a number of commercial brands.

Can E-cigarettes really help smokers quit?

The study, led by Boston University School of Public Health (BUSPH) researchers, found that 31 per cent of respondents reported having quit smoking six months after first purchasing an electronic cigarette, a battery-powered device providing tobacco-less doses of nicotine in a vaporized solution.

The average six-month abstinence rate for traditional nicotine replacement products, such as nicotine patches or gum, is between 12 and 18 per cent.

“This study suggests that electronic cigarettes are helping thousands of ex-smokers remain off cigarettes,” said lead author Michael Siegel, professor of community health sciences.

The researchers conducted an online survey of 222 first-time purchasers of electronic cigarettes, also known as e-cigarettes, from a leading electronic cigarette distributor. Of those who were not smoking at six months, 34.3 per cent reported not using electronic cigarettes or any nicotine-containing products. Almost 67 per cent of respondents reported having reduced the number of cigarettes they smoked after using electronic cigarettes.

The study’s main limitation is the low response rate of 4.5 per cent. It is possible that those who responded to the survey were more likely to have quit smoking than those who did not respond. Nevertheless, despite this limitation, the study authors believe that this is the best evidence to date on the effectiveness of electronic cigarettes for smoking cessation.

They point out that this is the first survey that relied upon an unbiased sampling frame.

Despite the limitation, the authors conclude that electronic cigarettes “hold promise as a smoking-cessation method and that they are worthy of further study using more rigorous research designs.”

The study has been published online ahead of print in the American Journal of Preventive Medicine

Legislature debates tobacco tax hike

The state House and Senate health committees are considering bills that would increase the tax on a pack of cigarettes by $1, and a fight is already brewing over how to spend that new revenue.

It’s not clear if there are enough votes in either chamber to pass the tax — especially in what’s now an election year — but lawmakers and lobbyists are eyeing how to spend the $120 million to $160 million a year the tax would bring.

The proposal would raise the tax on a pack of cigarettes from 55 cents to $1.55. It would also raise the tax on wholesale smokeless tobacco products from 7 percent to 50 percent.

Lawmakers want to see at least some of the money used to fix health care problems — though there is debate over what exactly problems it should go toward. And others want to see the new money go to paying down long-term debts.

There is also some pressure, likely from industry representatives, to phase the tax in over several years.

Of particular note is the divided mind of Senate Finance Chairman Roman Prezioso, D-Marion.

In his previous role as chairman of the Senate Health and Human Resources Committee, Prezioso was a major backer of increasing tobacco taxes. But this year, as finance chairman, he said he’s torn by a new set of pressures.

“My world just got a little bigger,” he said.

“The question is, first of all, ‘Do we have the votes to get it through the Senate?’ ” Prezioso said.

“If there isn’t (interest) I’m not going to put people through the agony of trying to debate an issue that we know isn’t going to pass,” he said.

Beyond that, he has a list of pros and cons.

On one hand, increasing the tax inevitably decreases the number of tobacco users and provides a stable revenue stream for the state. Even though some chewers and smokers will quit, the higher tax will still generate tens of millions in additional revenue from those who are so addicted they’ll put up with almost anything.

On the other hand, the state is expected to have a $240 million surplus at the end of the year — a quarter billion more in expected revenue than officials had projected.

It might be hard to justify a tax increase of any kind under those conditions.

“People say, ‘Why are doing this while we have money?’ ” Prezioso said.

The new chairman of the Senate health committee, Sen. Ron Stollings, D-Boone, said he wants to see the tobacco tax pass and for the money to go to medical care.

“You could take bold new stabs at public health issues,” he said.

Stollings, a doctor, said tobacco tax money could be used to provide much needed dental care for the state’s poor, to help deal with the massive budget holes expected in the state Medicaid program in coming years, or even to help pay down the state’s multi-billion health insurance liability for retiring workers over the next three decades.

Stollings said if the state doesn’t spend the money now in preventative care, it will end up paying it later anyway.

Prezioso said there’s a “debate within a debate” over how to spend the money.

The bill sets aside half the revenue to go to health care-related expenses and provides about $27 million specifically for smoking cessation programs. But the vagueness on how the rest of the money will be spent has provided an opening for interest groups.

The House Health and Human Resources Committee was set to consider the tax bill during a regular committee meeting Wednesday afternoon. But one lobbyist asked the committee to hold a public hearing on the bill so one of his clients could make their case at the hearing for some of the money to go their way.

The lobbyist, Tom Susman, represents the West Virginia Behavioral Health Care Providers Association. The group of community health care providers could use more money to help provide care for drug abusers.

“We don’t have an infrastructure in this state that is necessary to take care of the issues we have,” Susman said. “You can’t lock everybody up, you can’t build enough jails.”

The public hearing will likely occur in the middle of next week. The Coalition for a Tobacco-Free West Virginia also asked for a hearing to draw attention to their issues.

House Health and Human Resources Committee Chairman Don Perdue, D-Wayne, acknowledged there was infighting over how to spend the money from the would-be tax. It “changes probably daily,” he said.

“The first thing we have to establish is, ‘Can it pass?’ ” he said.

Its chances could hinge in part on what coalition forms to support the bill and who gets what money. At the top of the food chain, acting Gov. Earl Ray Tomblin has said he does not plan to raise taxes, though a spokesman could not immediately comment Wednesday evening about the cigarette tax.

One group that opposes the tax outright is the West Virginia Wholesalers Association.

John Hodges, the executive director, said his group opposes any kind of new tax because it could hurt business and drive customers to other states.

“People will travel to buy cigarettes or smokeless tobacco, either one, to save that kind of money,” he said.

State cigarette taxes are lower in Kentucky, where they are currently 60 cents per pack, and Virginia, where taxes are at 30 cents per pack, though local governments also tax in Virginia. The taxes are higher in Maryland, where they are $2; Pennsylvania, at $1.60; and, currently, Ohio, where the tax is $1.25.

Prezioso said $1.55 a pack seems to be the “tipping point” — just high enough to make some quit but low enough to make sure everybody doesn’t quit. If they did, the state would end up losing money, at least in the short term.

“It really sounds hypocritical — that you’re raising taxes to procure dollars as a health issue but you’re doing it to raise dollars,” he said.

Prezioso added, “The real deal would be to raise it to $3 and make people quit smoking — but you’re not making any money.”

By Ry Rivard: rivard@dailymail.com, 304-348-1796.

Kirkland v. R.J. Reynolds Tobacco Trial in Tampa

With billions of dollars in damages allegedly at stake, trial proceedings resumed this week in Kirkland v. RJ Reynolds, with the cross examination of defense expert witness Dr. Michael Bertino by Maria Sperando of the Willie Gary Law Firm.

Ms. Sperando challenged Dr. Bertino, a clinical professor of otolaryngology, on a change in his opinion of the possible cause for plaintiff Leroy Kirkland’s cancer, based on defense reports submitted to the court in December of last year and then again last month. The December opinion, in addition to an opinion from 2008 also prepared by Dr. Bertino for R.J. Reynolds, stated that there was no determinative cause for Mr. Kirkland’s cancer, and that past tobacco use was just one of many potential risk factors. However in January of 2011, Dr. Bertino’s amended report stated that due to the location of Mr. Kirkland’s cancer, past alcohol use was the most likely cause.

Attorney Sperando claimed that between December of 2010 and January of 2011 Dr. Bertino gained no new factual information that would support his change of position. According to Ms. Sperando, prior access to Mr. Kirkland’s medical records and deposition testimony gave Dr. Bertino the same information about the location of his cancer that had twice proved inadequate to determine if any specific risk factor played a causal role.

“You knew the location of Mr. Kirkland’s cancer,” Ms. Sperando stated. “In fact, you knew the location of Mr. Kirkland’s cancer before you submitted the December ’08 report because you already had the pathology report.”

Although both sides have hired expert witnesses to testify on their behalf, prominent trial attorney Willie Gary and his co-counsel have repeatedly challenged the credibility of witnesses retained by the tobacco companies over the course of the trial. Mr. Gary’s firm is seeking over $10 billion in potential damages for Mr. Kirkland, who started smoking cigarettes as a child while working in an R.J. Reynolds warehouse. $10B is the largest award sought by a plaintiff since the individual Engle progeny tobacco trials began in 2009.

Philip Morris Int’l Inc. Profits

RICHMOND, Va. — Cigarette maker Philip Morris International Inc., which sells Marlboro cigarettes and other U.S. brands abroad, reports its fourth-quarter and full-year results Thursday.

Whether fewer cigarettes sold in the wake of tax hikes and growing tobacco control efforts. Smokers face new tax hikes, bans, health concerns and social stigma worldwide, but the impacts are starkest in the United States.

With offices in New York and in Lausanne, Switzerland, Philip Morris has compensated for consumers buying cheaper cigarettes — and for the weak economy — by cutting costs and raising its prices. Its market share has increased.

Last quarter, Philip Morris International’s cigarette shipments grew 4.5 percent to 229.2 billion sticks. Especially key were large gains in Asia, including Indonesia, Korea and Pakistan, and the favorable impact of acquiring Fortune Tobacco Co. in the Philippines.

Shipments fell 4.6 percent in the European Union, where tax hikes hurt as well. Volumes fell about 3 percent in Eastern Europe, the Middle East and Africa and about 2 percent in Latin America and Canada.

Analysts also expect the company’s earnings to be affected by foreign exchange rates compared with the U.S. dollar. When the dollar is rising, companies that sell goods internationally and must convert revenue from foreign currencies usually take a hit in the dollar value of that revenue. That effect is particularly strong for Philip Morris International, because it does all its business overseas.

Philip Morris International is the world’s second-biggest cigarette company after the state-controlled China National Tobacco Corp.

Altria Group Inc. in Richmond, Va., owner of Philip Morris USA, spun off Philip Morris International in 2008. Altria is the largest U.S. cigarette seller.

Analysts on average expect Philip Morris International to report earning 97 cents per share on revenue of $7.297 billion, according to FactSet. Analysts typically exclude one-time items.

Philip Morris International reported net income of 80 cents per share on revenue of $6.72 billion.

Roll-your-own tobacco shops spread as cost of cigarettes rises

PORT ORCHARD, – Kathryn Davis, 78, lives on a fixed income, and has at times passed up grocery items to buy cigarettes.Roll-your-own tobacco shops

Last week, Davis made her first visit to DIY Tobacco in downtown Port Orchard, where customers purchase loose tobacco and roll their own smokes at a deep discount.

With help from her granddaughter, Davis inserted a tray of paper tubes with filters into a large machine, dumped the tobacco in the top and waited. The contraption hissed and banged methodically, churning out the equivalent of a carton of smokes in about eight minutes.

The cost for materials and use of the machine is about $33 for 200 smokes, half to two-thirds of what Davis might pay for a carton of commercially manufactured cigarettes.

“I don’t have that much money every month. When you live on a small income, you’ve got to get the cheapest things you can find,” Davis said.

That’s the idea behind DIY Tobacco, said Casey Kroesser, who opened the business in December. Kroesser, who formerly worked for Kitsap Credit Union and taught budgeting classes, said she isn’t out to recruit new smokers. She just wants to give those who already do smoke a break.

Taxes on cigarettes have increased since the passage of the federal Family Smoking Prevention and Tobacco Control Act of 2009. Smokers in Washington state now pay just more than $3 of federal tax and just more than $1 of state tax on a pack of cigarettes that typically costs around $7.50, according to Mike Gowrylow, spokesman for the state’s Department of Revenue.

DOR has no problem with DIY Tobacco and the rapidly growing number of businesses like it that cut out the middle man. DIY staff are careful not to call what they sell “cigarettes” or to do anything but coach new customers through the process to avoid the impression they are manufacturing. DIY pays taxes on the loose tobacco it buys and other relevant taxes, but customers do not pay the same level of taxes they would for a pack of cigarettes.

“There’s nothing illegal about that,” Gowrylow said. “People can roll their own, and it doesn’t matter whether they do it by hand or in a machine.”

State officials, however, are awaiting the outcome of a federal case involving the manufacturing question. The case is based in Ohio, home of the company that makes the rolling machines.

Responding to roll-your-own proponents, the U.S. District Court for the Northern District of Ohio in December issued a temporary injunction against the Alcohol and Tobacco Tax and Trade Bureau. For now, the agency cannot enforce federal regulations that would require roll-your-own businesses to get manufacturing licenses, and increase the cost of their product.

“We don’t really have a dog in this fight,” Gowrylow said. “But we’re standing by to see what the federal courts say about whether this constitutes manufacturing.”

Nor does Washington state have a beef with the fact that some roll-your-own businesses, including DIY, use pipe-grade tobacco instead of cigarette tobacco, which is taxed at a higher rate, Gowrylow said.

Some tobacco industry representatives have alleged that roll-your-own companies have misrepresented the grade of the tobacco they use to exploit the tax loophole.

David Sutton of Altria Media Affairs, representing Philip Morris USA, said there’s been a marked increase in sales of pipe tobacco and a corresponding decrease in roll-your-own tobacco, suggesting that roll-your-own businesses are exploiting a tax loophole.

“Altria’s tobacco companies support legislative efforts to ensure that roll-your-own tobacco is taxed in the manner that Congress intended,” said Sutton, whose company is not party to the federal case.

DIY’s Kroesser said she deals only with wholesalers she has thoroughly researched. She said she can see and smell the difference between regular tobacco and pipe tobacco, which has longer fibers and a higher moisture content.

The U.S. Food and Drug Administration also is involved in the roll-your-own debate. The agency is “gathering information about practices related to these machines to determine the appropriate regulatory response,” said spokesman Jeff Ventura.

Kroesser tracks pending litigation over manufacturing and other developments in the roll-your-own industry. She said she will roll with any new regulations when and if they are imposed.

Scott Lindquist, director of Kitsap County Health District, said smokers should not be lulled into a false sense of security. Research overwhelmingly shows the detrimental effects of tobacco, including contributing to lung cancer, heart disease, emphysema and other serious diseases, he said.

“I would say any tobacco is not healthy period,” Lindquist said. “I just don’t see this as an improvement.”

By Chris Henry
The Sun in Bremerton, Wash.

Best Performance in the Tobacco Industry

Feb 08, 2011 — Below are the top five companies in the Tobacco industry as measured by relative performance. This analysis was compiled based on yesterday’s trading activity as we search for stocks that have the potential to outperform.

British American Tobacco (AMEX:BTI) ranks first with a gain of 2.06%; Lorillard (NYSE:LO) ranks second with a gain of 1.92%; and Philip Morris (NYSE:PM) ranks third with a gain of 0.55%.

Altria Group
(NYSE:MO) follows with a gain of 0.25% and Universal (NYSE:UVV) rounds out the top five with a gain of 0.24%.

SmarTrend currently has shares of Lorillard in an Downtrend and issued the Downtrend alert on November 22, 2010 at $85.36. The stock has fallen 10.5% since the Downtrend alert was issued.

Bill targets flavored tobacco products

OLYMPIA, Wash. — Lawmakers in Olympia have proposed a ban on flavored tobacco products, but barring such items could cost theflavored tobacco products state millions of dollars.

Bills in the House and Senate would ban flavored tobacco products such as cigarillos, and smokeless tobacco products like pouches, pills or capsules.

Secretary of the Department of Health Mary Selecky said Monday in a Senate hearing that flavor plays a big factor in attracting young smokers.

But Office of Financial Management reports that the state would lose around $20 million in the next biennium because of tax revenue loss. The state is facing a $5 billion deficit this session.

Republican Sen. Janea Holmquist Newbry of Moses Lake says the bill may preclude adults from choices. Opponents also say the bill is sweeping because it could include pipe tobacco.

The measure also establishes more regulation on tobacco displays in stores and gives local authorities more power in tobacco regulations.

Electronic cigarettes hold promise as aid to quitting

A study led by Boston University School of Public Health (BUSPH) researchers reports that electronic cigarettes are a promising tool electronic cigaretteto help smokers quit, producing six-month abstinence rates nearly double those for traditional nicotine replacement products.

In a study published online ahead of print in the American Journal of Preventive Medicine, researchers found that 31 percent of respondents reported having quit smoking six months after first purchasing an electronic cigarette, a battery-powered device providing tobacco-less doses of nicotine in a vaporized solution. The average six-month abstinence rate for traditional nicotine replacement products, such as nicotine patches or gum, is between 12 and 18 percent.

“This study suggests that electronic cigarettes are helping thousands of ex-smokers remain off cigarettes,” said lead author Michael Siegel, professor of community health sciences.

The researchers conducted an online survey of 222 first-time purchasers of electronic cigarettes, also known as e-cigarettes, from a leading electronic cigarette distributor. Of those who were not smoking at six months, 34.3 percent reported not using electronic cigarettes or any nicotine-containing products. Almost 67 percent of respondents reported having reduced the number of cigarettes they smoked after using electronic cigarettes.

The study’s main limitation is the low response rate of 4.5 percent. It is possible that those who responded to the survey were more likely to have quit smoking than those who did not respond. Nevertheless, despite this limitation, the study authors believe that this is the best evidence to date on the effectiveness of electronic cigarettes for smoking cessation.

They point out that this is the first survey that relied upon an unbiased sampling frame.

Despite the limitation, the authors conclude that electronic cigarettes “hold promise as a smoking-cessation method and that they are worthy of further study using more rigorous research designs.”

While more study needs to be done on the actual mechanisms of what apparently makes electronic cigarettes effective, Siegel said he believes there might be a link between the e-cigarette’s physical simulation of smoking with the success of quitting.

“While it is well-recognized that nicotine plays a role in smoking addiction, little attention has been given to the behavioral aspects of the addiction,” he said. “These devices simulate the smoking experience, which appears to make them effective as a smoking cessation tool.”

Electronic cigarettes have proven controversial since coming onto the market more than three years ago. A number of anti-smoking groups have argued that e-cigarettes should not be sold because they have not been shown to be effective for smoking cessation, and several states – including New York – are considering banning e-cigarettes altogether.

“Banning this product would invariably result in many ex-smokers returning to cigarette smoking,” Siegel said. “Removing electronic cigarettes from the market would substantially harm the public’s health.”

The study was co-authored by Kerry L. Tanwar and Kathleen S. Wood, also of Boston University School of Public Health.

By Elana Zak
ezak@bu.edu
617-414-1401
Boston University Medical Center

Tobacco Mosaic Virus

Tobacco mosaic virus (TMV) is a type of retrovirus. TMV is a virus that attacks tobacco plants. It is closely related to the tomato mosaic virus (ToMV) which infects tomatos. Other plants that are susceptible to these types of virus include peppers and ornamentals like petunias and snapdragons. I did already know that the TMV has been widely studied, because it’s a commonly used vector for cloning foreign proteins into plants. Not knowing the answer to the above question myself, however, I had to look it up and discovered a few more cool things about the TMV.

  • TMV is an RNA virus, but that alone doesn’t make it a retrovirus. TMV carries a single strand of positive-sense RNA. It replicates by producing an anti-sense RNA strand using the positive strand as a template, from which more positive-sense RNA strands are made. Thus, TMV is a ssRNA virus with no DNA stage in it’s replication process, and NOT a retrovirus.
  • The name “mosaic” comes from the mottled pattern of colors the virus causes on leaves and fruit of infected plants.
  • TMV expresses a “movement protein” (MP) that controls RNA silencing signals (involving dsRNA and siRNAs) produced by host plants and intended to prevent the spread of the virus.

Consumption of tobacco products infected with the tobacco mosaic virus has not been found to have any effect on humans.

New Port Orchard tobacco business for DIY smokers

PORT ORCHARD, Wash. — Kathryn Davis, 78, lives on a fixed income, and has at times passed up grocery items to buy cigarettes.

On Thursday, Davis made her first visit to DIY Tobacco in downtown Port Orchard, where customers purchase loose tobacco and roll their own smokes at a deep discount.

With help from her granddaughter, Davis inserted a tray of paper tubes with filters into a large machine, dumped the tobacco in the top and waited. The contraption hissed and banged methodically, churning out the equivalent of a carton of smokes in about eight minutes.

The cost for materials and use of the machine is about $33 for 200 smokes, half to two-thirds of what Davis might pay for a carton of commercially manufactured cigarettes.

“I don’t have that much money every month. When you live on a small income, you’ve got to get the cheapest things you can find,” Davis said.

That’s the idea behind DIY Tobacco, said Casey Kroesser, who opened the business in December. Kroesser, who formerly worked for Kitsap Credit Union and taught budgeting classes, said she isn’t out to recruit new smokers. She just wants to give those who already do smoke a break.

Taxes on cigarettes have increased since the passage of the federal Family Smoking Prevention and Tobacco Control Act of 2009. Smokers in Washington now pay just more than $3 of federal tax and just more than $1 of state tax on a pack of cigarettes typically costing around $7.50, according to Mike Gowrylow, spokesman for the state’s Department of Revenue.

DOR has no problem with DIY Tobacco and the rapidly growing number of businesses like it that cut out the middle man. DIY staff are careful not to call what they sell “cigarettes” or to do anything but coach new customers through the process to avoid the impression they are manufacturing. DIY pays taxes on the loose tobacco it buys and other relevant taxes, but customers do not pay the same level of taxes they would for a pack of cigarettes.

“There’s nothing illegal about that,” Gowrylow said. “People can roll their own, and it doesn’t matter whether they do it by hand or in a machine.”

State officials, however, are awaiting the outcome of a federal case involving the manufacturing question. The case is based in Ohio, home of the company that makes the rolling machines.

Responding to roll-your-own proponents, the U.S. District Court for the Northern District of Ohio in December issued a temporary injunction against the Alcohol and Tobacco Tax and Trade Bureau. For now, the agency cannot enforce federal regulations that would require roll-your-own businesses to get manufacturing licenses, and increase the cost of their product.

“We don’t really have a dog in this fight,” Gowrylow said. “But we’re standing by to see what the federal courts say about whether this constitutes manufacturing.”

Nor does the state have a beef with the fact that some roll-your-own businesses, including DIY, use pipe-grade tobacco instead of cigarette tobacco, which is taxed at a higher rate, Gowrylow said.

Some tobacco industry representatives have alleged that roll-your-own companies have misrepresented the grade of the tobacco they use to exploit the tax loophole.

David Sutton of Altria Media Affairs, representing Philip Morris USA, said there’s been a marked increase in sales of pipe tobacco and a corresponding decrease in roll-your-own tobacco, suggesting that roll-your-own businesses are exploiting a tax loophole.

“Altria’s tobacco companies support legislative efforts to ensure that roll-your-own tobacco is taxed in the manner that Congress intended,” said Sutton, whose company is not party to the federal case.

DIY’s Kroesser said she deals only with wholesalers she has thoroughly researched. She said she can see and smell the difference between regular tobacco and pipe tobacco, which has longer fibers and a higher moisture content.

The U.S. Food and Drug Administration also is involved in the roll-your-own debate. The agency is “gathering information about practices related to these machines to determine the appropriate regulatory response,” said spokesman Jeff Ventura.

Kroesser tracks pending litigation over manufacturing and other developments in the roll-your-own industry. She said she will roll with any new regulations when and if they are imposed.

In the meantime, word of the new store has gotten around, and business is good.

John Ready, owner of Puget Sound Wine Cellar next door to DIY Tobacco, said what started out as an economic decision has now become a preference. Ready enjoys the taste of the roll-your-own tobacco, and he likes the idea that it doesn’t contain extra ingredients, a feature Kroesser, an occasional smoker, touts.

“I’m not by any means saying it’s healthy,” she said. “But it’s a healthier alternative to manufactured smokes.”

But Scott Lindquist, director of Kitsap County Health District, said smokers should not be lulled into a false sense of security. Research overwhelmingly shows the detrimental effects of tobacco, including contributing to lung cancer, heart disease, emphysema and other serious diseases, he said.

“I would say any tobacco is not healthy period,” Lindquist said. “I just don’t see this as an improvement.”

Kroesser plans to open a second store in East Bremerton in April.

The roll-your-own machines, which cost $33,900, are made by RYO Machine Rental LLC of Ohio. According to Joe Baba of Everett, who owns the Washington and Oregon distributorship for the RYO Filling Station, there are about 600 of the units nationwide. The machines were introduced just more than two years ago and have only recently

reached the West Coast.

“It’s a real cottage industry that’s benefiting the economy and benefiting smokers,” Baba said.

By CHRIS HENRY
Kitsap Sun

Government bans plastic packs for tobacco

The highly popular small plastic sachets would no longer be allowed to be used for packaging gutkha, pan masala and other tobacco products, the government ordered on Monday while notifying new rules for regulating the use of plastics and managing plastic waste.

The new rules, called the Plastic Waste (Management and Handling) Rules, 2011, also prohibit the use of recycled plastics for storing, carrying, or packaging food stuff.

The government, however, refrained from putting a complete ban on the use of plastics, as demanded by many environmental groups, saying that it was not only impractical but also undesirable. “It is impractical and undesirable to impose a blanket ban on the use of plastic all over the country. The real challenge is to improve municipal solid waste management systems. In addition to the privatisation and mechanisation of the municipal solid waste management systems, we must be sensitive to the needs and concerns of lakhs of people involved in the informal sector,” Environment Minister Jairam Ramesh said.

Plastic, though extremely popular in a variety of uses, is composed of toxic chemicals and is mostly non-biodegradable, making it a major pollutant. Many states have already banned its use and some others regulate its usage.

While arguing against a complete ban, Jairam had earlier said elimination of plastics would lead to a greater demand for paper, thereby resulting in more cutting of trees which is not an environmentally sound option. The new rules notified by the Environment Ministry on Monday stipulate that plastic carrybags must not be less than 40 microns thick. Earlier, the minimum thickness required was 20 microns. The thinner the plastic used, the more difficult it is to dispose.

In addition, plastic carrybags will be mandatorily white or contain only those colourants or pigments that are in conformity with the standards prescribed by the Bureau of Indian Standards.

In a bid to further discourage the use of plastics, the new rules say that plastic carrybags cannot be made available to consumers free of cost. The municipal authorities have been asked to determine suitable price for these bags.

The only exception to the rules are carrybags manufactured exclusively for export purpose.

Japan Tobacco Q3 profit falls

TOKYO, – Japan Tobacco (2914.T), the world’s No.3 cigarette maker, posted a 26 percent drop in quarterly operating profit after a tax hike hit its domestic business, but raised its annual outlook as the resulting dip in tobacco sales was less than predicted and as the yen remained weaker than expected.

Japan Tobacco, 50 percent owned by the Japanese government and with close to two-thirds of the nation’s cigarette market, said earlier that sales volumes in Japan fell by almost half year-on-year in October-December following the tax hike.

The company, which ranks behind Philip Morris International Inc (PM.N) and British American Tobacco (BATS.L) in sales volume worldwide, said operating profit fell to 65.7 billion yen ($799.5 million) in October-December.

The maker of the “Mild Seven” cigarette brand lifted its operating profit forecast to 308 billion yen from at 281 billion yen for the year to March, lower than the consensus of 310.9 billion yen in a poll of 14 analysts by Thomson Reuters I/B/E/S.

Japan’s government in October raised its duty by 70 yen ($0.85) a pack, but tobacco firms boosted prices higher, with the average price for a pack rising by more than one-third to 410 yen ($4.99) to offset the expected sales decline.

Last week, the world’s fourth-biggest cigarette maker, Britain’s Imperial Tobacco (IMT.L), surprised investors with a return to volume growth in the last quarter of 2010 boosted by business in emerging markets. [ID:nLDE7100T0]

As of Monday, shares of Japan Tobacco had risen over 20 percent since the implementation of the tax hike on Oct. 1, outperforming a 12.6 percent advance in the benchmark Nikkei 225. Its shares fell 2.1 percent to 333,000 yen on Monday before it released its earnings for the third quarter. ($1=82.17 Yen)
By James Topham

Tax increases have a negative impact

Mr. Davis wants us to relax about the impact of taxes on the state economy (YourViews, Jan. 29), but shouldn’t he also tell us to relax about spending? More spending will certainly follow higher taxes.

His argument that there is no evidence for lower taxes producing prosperity only proves that experts can be found supporting every side of an issue. So let us look at the negative effects of taxes, something that is easier to see and understand.

What happened to cigarette sales in New York City when taxes went up $1 per pack? Sales of cigarettes have declined by about one-third. Or what happened in New Jersey when that state implemented a millionaires’ tax? Well, last year, there was a significant reduction of millionaires in the state. The same thing is going on in the state of Washington.

Look at the level of job creation in the highest tax states in the country — New York, Illinois and Ohio — and compare that to job creation in Texas, Tennessee and Georgia. The latter states are growing because businesses flee high taxes.

Historically, everything from windows to closets to dog tails have been taxed and in every case you had a reduction in tax collections. Every increase in taxes produces a lower income to the state than the anticipated amount.

Daniel Webster was right when he said that the power to tax is the power to destroy. It is seriously time to cut spending first.

By John Butler, Bloomington

GCC countries set for total ban on e-cigarettes

DOHA: A blanket ban on the import and sale of electronic cigarettes (e-cigarettes) is on the cards in the GCC countries, with a gcc countriesrecommendation to this effect by the 70th conference of GCC Health Ministers Council which concluded here yesterday.

A statement issued by the conference underlined the “necessity for imposing a total ban” on e-cigarettes in line with the WHO guidelines and the findings of recent studies on the product.

Anti-smoking activists in the region have been campaigning for a ban on e-cigarettes, which are used as an alternative for traditional cigarettes, on grounds that it is more dangerous to the users compared to the traditional cigarettes.

WHO has disputed claims by producers of e-cigarettes that it helps people quit smoking and has warned of its harmful effects.

The Doha conference also expressed concern over the rising number of women smokers in the Gulf region and called for more efforts to raise awareness on the issue.

The conference urged the member countries to set up national centres for organ donation and transplant and conduct studies on major diseases that lead to kidney failures.

The importance of promoting the culture of organ donation in the region and co-operation between the member countries in donation and transfer of organs was also highlighted. The meeting called on the member countries to provide governmental support and funding to such activities.

The ministers lauded the Doha Declaration on organ donation and the successful Saudi experience in organ transplantation.

Regarding an earlier proposal to unify the prices of imported medicines in the GCC countries, the meeting decided to conduct further studies on the issue and forwarded it to the committee concerned.

The meeting urged member countries to establish a database on all medicines sold in the GCC market. A meeting would be held in Kuwait to discuss this issue. All member countries have been asked to update their database regularly. The ministers approved a five-year strategic plan on nursing aimed at addressing the shortage of qualified nursing professionals in the region. The meeting recommended setting up a specialised Gulf body to promote the nursing profession. The conference called on member countries to implement the concept of pharmacy care in private and public sectors.

The ministers decided to intensify monitoring on the approved medical centres in various Asian and African countries conducting health check ups for workers being recruited to the Gulf countries.

Reynolds American Jumps 44% On Higher Pricing

Reynolds American Inc.’s (RAI) fourth-quarter profit was up 44%, driven by higher pricing and productivity improvements. Adjusted pallmallresults narrowly missed Wall Street’s expectations.

Looking ahead, the tobacco company expects adjusted full-year earnings of $2.60 to $2.70 a share. Analysts surveyed by Thomson Reuters projected a profit of $2.66.

The company has shifted its focus to a few key brands and has consolidated production. It has also diversified into smokeless tobacco as cigarette sales continue to decline. Meanwhile, Reynolds last month agreed to sell its Lane Ltd. roll-your-own and pipe tobacco unit to Denmark’s Scandinavian Tobacco Group AS for $205 million.

Reynolds reported a profit of $309 million, or 53 cents a share, up from $215 million, or 37 cents a share, a year earlier. Excluding write-downs and costs primarily related to plant closings and the expansion of R.J. Reynolds’ field trade-marketing organization, adjusted earnings rose to 60 cents a share from 55 cents. Net sales fell 0.7% to $2.08 billion.

Wall Street projected a profit of 61 cents on revenue of $2.15 billion.

Gross margin widened to 46.8% from 45.2%.

The R.J. Reynolds Tobacco division’s earnings jumped 58%, as volume climbed 8.5% for its Camel brand of cigarettes and 19% for Pall Mall cigarettes. Both brands notched higher market share from a year ago. Total R.J. Reynolds domestic volume fell 5.1%, or down 1.9% excluding private label brands. Total market share, excluding private label brands, grew one percentage point.

At the American Snuff unit, which makes Grizzly- and Kodiak-brand moist snuff, profit decreased 17%, although when adjusted for charges, the unit’s profit would have risen 24% on higher moist-snuff pricing and volume. Total moist snuff volume climbed 8.2%, while the total share of shipments rose 0.5 percentage point.

Shares at Reynolds were down 0.1% at $32.40 in premarket trading.

By John Kell, john.kell@dowjones.com
Dow Jones Newswires