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October 22nd, 2016:

If Big Tobacco sells e-cigarettes, they’ll ‘recruit a whole new generation’ of smokers: Public Health Ontario

Pending federal regulations should limit flavours, marketing to kids, Dr. Peter Donnelly says

If Ottawa lets Big Tobacco into the e-cigarette business it would be handing the industry the chance to hook teenagers on nicotine and turn them into lifelong customers, the chief executive officer of Public Health Ontario says.

“It’s desperately difficult for people to give up smoking once they’re addicted to nicotine,” Dr. Peter Donnelly said. “And my concern is that e-cigarettes and vaping of nicotine-containing mixtures could be a very effective way of recruiting a whole new generation of nicotine-addicted young people who are then very prone to turn to smoking cigarettes.”

The federal government announced last month that it would introduce changes to the Tobacco Act in order to regulate the burgeoning e-cigarette and vaping industry.

Right now, e-cigarettes can only legally be sold in Canada without nicotine — and since they’re not regulated by Health Canada they can’t be marketed as a way to help someone stop smoking.

But what’s legal and what’s actually happening are not necessarily the same thing.

More than 26 per cent of people who vape reported that their last e-cigarette contained nicotine, while another 19 per cent said they didn’t know if their last vape was nicotine-free or not, according to a 2015 study on countrywide tobacco uses and trends by Waterloo’s Propel Centre for Population Health Impact.

The study also found that most specialty vaping stores and online e-cigarette shops offer nicotine-laced vaping liquid, much of which is flavoured to taste nothing like tobacco.

‘Who are they targeting?’

It’s an issue that Donnelly said the pending regulations need to address in order to balance the needs of an adult population trying to quit smoking, with protectionist measures to keep youth from taking up the habit.

The flavours include everything from bubblegum to maple syrup to mint, something that has been the target of public health officials like Donnelly who argue it’s essentially marketing to children.

“I mean who are they targeting?” he said. “I don’t know many adults who are going to go for gummy bears.”

The public health official said he wants to see regulations that would make it illegal to market e-cigarettes to youth, which he said could include putting limits on what kind of flavours could be sold.

Nascent research surrounding e-cigarettes has found that vaping appeals to young people, Donnelly said, perhaps because it seems like a safer alternative.

Conflicting research

“But cigarettes are an outstandingly dangerous product and the worry is that nicotine-dispensing e-cigarettes and vaping products are very attractive to young people,” he said. “If they use them, they’re more likely to go on and smoke cigarettes.”

Canada’s largest tobacco company, meanwhile, says that it’s not interested in getting into the e-cigarette industry to target children.

“I don’t want my kids to smoke,” Imperial Tobacco spokesman Eric Gagnon told CBC’s the fifth estate. “We support reasonable and evidence-based regulation, especially the ones aimed at keeping tobacco products out of the hands of kids.”

Instead, he said, the tobacco industry wants to be able to offer a product that’s less harmful to people who are already addicted to smoking, likening it to McDonald’s offering a salad on their menu as well.

It’s a kind of logic that Dr. Gopal Bhatnagar might understand.

The cardiovascular surgeon at Trillium Health Centre is also the owner of 180 Smoke, a popular chain of vaping shops, and said he believes he’s offering a tool to help smokers quit.

The issue, however, is that because it’s a new product there are few long-term studies measuring its effectiveness. And those that have been done offer conflicting information.

The medical journal, The Lancet, for example, released a study in January that found people were 28 per cent less likely to quit smoking by using e-cigarettes than by turning to other methods. In March, however, it published another piece, which found that vaping is less harmful to someone than traditional cigarettes.

So when asked whether it seemed out of character for a health professional to sell an addictive product like nicotine, Dr. Bhatnagar responded that pharmacists also sell nicotine through gums, patches and sprays.

“Combustible tobacco smoking remains the number one preventable cause of disease in our society,” he said. “So I feel that anything that can continue to reduce the smoking rates and lessen the harm caused by tobacco is a very positive thing.”

Vaper-ised! Why boom in e-cigarettes is key to BAT and Reynolds’ £38bn merger as tobacco sales go up in smoke

It’s set to be the biggest transatlantic merger in years and could create the world’s largest tobacco company.

But the success of the proposed buyout by British American Tobacco of Reynolds American may hinge not on tobacco sales, but on the booming market for e-cigarettes.

On Friday, Footsie-listed BAT, which owns the Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans brands, made a takeover approach for Reynolds – the maker of Camel cigarettes.

BAT already owns just over 42 per cent of Reynolds, but the deal would see BAT pay $47billion (£38billion) to take full control.

The deal, BAT says, would allow the combined company to make cost savings of $400million a year, which has left some analysts wondering whether such a colossal deal is worth it for such relatively modest gains.

However, the logic of the deal lies as much in the new market for ‘vaping’ and other non-traditional nicotine products, as it does in the traditional pack of 20 cigarettes.

Smoking is in decline across Britain, while the use of e-cigarettes is growing fast. Figures from Public Health England show a surge in vaping against a steady decline in smoking, a pattern expected to be replicated across the developed world.

While most major tobacco groups have developed e-cigarette brands, none has secured the kind of market dominance they are used to with traditional tobacco.

One adviser to the deal said so-called ‘new generation products’ were a significant reason for the bid. He said: ‘Both players are chasing the new generation market hard, putting in a lot of research and development and clearly it’s a big market opportunity.


‘At the moment it’s a pretty fragmented market, but it’s a growing one. So the two companies will be able to bring together their research and development, and sales capability, across the globe as a consequence of the merger.’

In the e-cigarette market BAT has ‘got nothing in the States’, he added, while Reynolds has got ‘nothing outside of the States’.

Reynolds was one of the pioneers in the sector in the US, first launching an e-cigarette in the mid-1990s – albeit without much success. The recent boom in vaping is now looking a surer bet.

Nigel Driffield, professor of international business at Warwick Business School, said: ‘They know their core business is declining and what they are looking to do is to find ways to diversify and protect their cash flow as best they can. Obviously cigarette-replacement products in whatever form are one of those.’

Nicholas Hyett, equity analyst at financial services firm Hargreaves Lansdown, said the deal also brought two different types of e-cigarette technologies under the same roof.

While BAT has favoured forms of vaping where liquid nicotine is heated, Reynolds has gone down a route known as ‘heat not burn’, in which tobacco itself is heated but not set on fire.

Hyett said global leader Philip Morris (the maker of Marlboro) has favoured heat not burn while Imperial Brands (the maker of Lambert & Butler and Embassy, among others) have favoured vaping.

BAT’s leading ‘next generation’ product is Vype, launched in 2013, which is by far its most popular e-cigarette, though the company does have a tobacco-heating product, the glo iFuse. Hyett said BAT had a 35 per cent share of the vaping market in the UK.

A BAT-Reynolds merger would allow both companies to push their respective e-cigarettes into new markets, which for BAT would mean getting its leading Vype brand into the lucrative US.

‘This would allow BAT to compete with Philip Morris directly,’ said Hyett.

BAT chief executive Nicandro Durante said: ‘We have been a shareholder in Reynolds since its creation in 2014 and have benefited from its growth in the US market.

‘The proposed merger of our two companies is the logical progression in our relationship and offers all shareholders a stake in a stronger, truly global tobacco and next generation products company.’

Meanwhile, Driffield said he believed the timing so soon after the Brexit vote was coincidental. He warned that while the deal, if successful, would create a global giant, it might not benefit the UK economy greatly.

He added: ‘I think both firms are trying to consolidate themselves where they still have a significant presence, cut costs because they both have overcapacity, and then look to diversify away from tobacco while the cash from that is still coming in.’

Reynolds has indicated that it is open to discussing BAT’s approach, but analysts believe the British company may yet have to raise its price.

The future prospects of e-cigarettes under a merged group may be vital to convincing the US group, if the deal is not to go up in smoke.