Large Tobacco turns to rooibos tea to counter upcoming ban

LONDON, Oct 16 (Reuters) – Large Tobacco corporations together with British American Tobacco (BATS.L) are promoting warmth sticks produced from nicotine-infused substances comparable to rooibos tea, countering an incoming European Union ban on flavoured heated tobacco merchandise.

Whereas the sticks mark a brand new method to inhale the addictive drug, well being specialists warn that their security is unclear.

The trade has produced “heat-not-burn” sticks containing tobacco for years, aiming to keep away from the poisonous chemical compounds launched through combustion.

These “lowered danger” merchandise, that are positioned in a tool to warmth them, have helped offset falling demand for conventional cigarettes resulting from rising well being consciousness and heavy taxation in some markets.

British American Tobacco (BAT) (BATS.L) has now gone a step additional, launching a model of its sticks containing nicotine-infused Rooibos tea as an alternative of tobacco in 9 European markets, together with Germany and Greece. The corporate plans to roll the product out globally, it advised Reuters.

The transfer supplies “grownup nicotine customers and people who smoke with the widest attainable vary of reduced-risk merchandise,” BAT mentioned in a press release.

There might, nevertheless, be as but unknown dangers related to inhaling the tea, researchers warned.

“Something that burns or is vaporised… and inhaled into the lungs, most likely will trigger some results,” mentioned Erikas Simonavicius, a analysis affiliate at King’s Faculty London.

Tobacco firms have but to publish any analysis displaying the well being implications of rooibos or different zero-tobacco sticks, Simonavicius added.

BAT, the primary huge tobacco participant to say what its zero-tobacco sticks are produced from, declined to say whether or not it had carried out such analysis.

Rival Philip Morris Worldwide (PMI) will begin rolling out a zero-tobacco stick later this yr, it mentioned throughout an investor day in September.

It declined to inform Reuters what the product is produced from, or to touch upon its well being implications.

PMI (PM.N) CEO Jacek Olczak advised shareholders that its zero-tobacco sticks might keep away from the regulatory scrutiny that tobacco merchandise face.

BAT’s zero-tobacco sticks usually are not topic to present EU tobacco guidelines, the corporate advised Reuters.

Meaning it might probably promote rooibos sticks in flavours like peppermint and tropical fruit even after a ban on flavoured heated tobacco merchandise is applied throughout the bloc later this month.

“The apparent benefit these new merchandise ought to present is a method to maintain menthol and flavour varieties on the EU market,” Jefferies analyst Owen Bennett mentioned in a notice.

Rivals Imperial Manufacturers (IMB.L) and Japan Tobacco Worldwide (2914.T) declined to touch upon whether or not they are going to launch zero-tobacco sticks.

Nonetheless, the regulatory benefits these merchandise get pleasure from are unlikely to final lengthy, Jefferies’ Bennett and Morningstar senior fairness analyst Phil Gorham mentioned. Within the EU, new tobacco directives are both overdue or anticipated within the subsequent few years.

“The subsequent technology of regulation goes to focus on nicotine,” Gorham mentioned.

In Germany, some smaller purveyors of tea sticks are already in a dispute with authorities over whether or not their merchandise are topic to present tobacco tax guidelines, Fabienne Diekmann, a lawyer representing the businesses, mentioned.

REGULATION NEEDED

Tobacco firms nonetheless make the overwhelming majority of their income from cigarettes. BAT, as an illustration, sells manufacturers like Dunhill, Fortunate Strike and Camel in additional than 170 markets worldwide, with heavy regulation and taxes in lots of them.

Its rooibos warmth sticks can be found in Germany on BAT’s official heated tobacco web site for five.80 euros ($6.11), the identical as most of its flavoured tobacco warmth sticks, a pricing coverage confirmed by the corporate to Reuters regardless of the brand new product not being topic to EU tobacco taxes.

Meaning they may obtain the next revenue margin, Morningstar’s Gorham mentioned.

Throughout the European Union, heated tobacco merchandise have to be taxed at a minimal of 20% of the retail worth, although nationwide governments can go larger.

Researchers mentioned it was essential to offer all kinds of options to people who smoke, however these wanted to be correctly regulated to make sure they don’t tempt extra folks to devour nicotine.

“The way in which to stop that… is to be very strict about how these merchandise are marketed and the way they’re displayed,” mentioned Lion Shabab, a professor of well being psychology at College Faculty London.

Tobacco firms say their various merchandise are focused at people who smoke, and never people who don’t at present devour nicotine.

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