Investors Cashing In On Smokeless Nicotine Debate

Despite warnings from the FDA and others, smokers aren’t the only ones who seem to have a pent up demand for the latest “non-smoking” fad.
If you haven’t yet noticed, new “E-cigarette” products are popping up on websites and on vending carts at local malls across America.
By most accounts, retailers who carry them have trouble keeping them in stock, but it’s not a phenomenon exclusive to the U.S. In China, the U.K. and Australia these E-Cigarettes are off the charts hits that offer users the chance to enjoy a puff without the 4,000 chemicals and toxins found in your typical death stick.
Electronic cigarettes use vapor comprised of propylene glycol, water, glycerin, flavoring, and nicotine to help soothe the urge for a smoke. In a country where 53,000 non-smokers die each year from second hand smoke, these electronic versions of cigarettes seem to be more readily accepted in public- especially given the fact that the devices don’t produce actual smoke. They produce only vapor and users are given the freedom to enjoy their habit in even the most smoker unfriendly surroundings.
Meanwhile, the FDA, big tobacco and pharmaceutical companies all seem to have taken aim at the technology, but smokers say none of them have presented solid scientific evidence that second hand vapor is harmful to bystanders. At least not yet.
Investors and speculators on Wall Street are obviously jonesing for a piece of the E-cigarette action too.
During the last few sessions, shares of Mobile Media Unlimited Holdings Inc. (OTC: MMUH.PK) have shot up from sub-penny level to nearly a nickle. All this after the London based company announced the acquisition of TzuFuma Inc.- a wholesale distributor business of Electronic Cigarettes.
Suddenly, Mobil Media Unlimited Holdings, formerly Veridigm, Inc., a development-stage company which has focused mostly on providing merchant banking type services to small, private and micro cap public companies has become the only profitable and publicly traded E-cigarette play in the market. The company announced that it had acquired TzuFuma on December 17th, but the acquisition became official only hours ago.
Robert Paterson, President of TzuFuma Inc. stated in a telephone interview: “We have ironed out all of the remaining details regarding financing and the integration of the acquisition and I am pleased to announce that no significant material changes were made to the original MOI. The Company and its associates bring a wide talent pool to the table with skill sets we believe will immediately enhance marketing and accelerate our clients into mass distribution here in the United States but more importantly Internationally.”
Several items make this story notable. The first is that the mad scramble for shares is taking place during the winter holidays- one of the most lightly traded periods of the year. And while the rocketing share price is definitely fueled by the fact that the company has an extremely low float (under 25 million shares), it’s telling that speculators who had been looking for a profitable E-cig play have finally found one.
Another company, Ruyan Group (Holdings) Limited trades only on Hong Kong exchange (HKG:0329) and while the company and its subsidiaries are principally engaged in production and sales of a series of health care products, they do produce RUYAN atomizing cigarettes, only not yet profitably.
Same for Smokefree Innotec, Inc. (OTC: SFIO.PK). That company has had no revenue and is still operating in debt, but that didn’t keep shares from running to $.55 last year. It trades today at under $.03.
By comparison, MMUH filings show that year to date, TzuFuma Inc. has generated just under $5,000,000 (Five Million) in gross sales and Paterson seems to feel that figure will increase in the coming year. “We anticipate gross revenues from domestic sales to be in the region of 12-14% of our total gross revenue for fiscal 2010,” says Paterson. “We fully anticipate 2010 to be a bumper year.”
The parent company is now doing its part to make sure they are under full compliance and casting the best image going forward.
Gary Freeman, CEO of MMUH, stated: “Our timely production of unaudited financials for MMUH and our bringing Pink Sheets filings towards full compliance is key to the Company’s future plans. We will publish TzuFuma’s unaudited financial statements for the period of 2nd Qtr-4th Qtr 2009 in early 2010.
Don’t be surprised to see investors cash in profits from this novel approach to the old habit, even as the debate on these devices has intensified in recent months. Front page stories in USA Today and editorials in other major newspapers such as the New York Times and Los Angeles Times have all taken on the subject.
Even California Governor Schwarzenegger recently vetoed a bill that would have denied California citizens the right to purchase electronic cigarettes.
“Unfortunately, many of the arguments we`ve seen recently against electronic cigarettes have been driven by fear of the unknown, insufficient evidence, political agendas, and ignorance about our members` products,” said former U.S. Congressman and Electronic Cigarette Association (ECA) President Matt Salmon. “As in the case of California Governor Schwarzenegger, we’ve found that reasonable people, when willing to honestly and intellectually evaluate the information about electronic cigarettes, find that these products provide smokers a viable alternative to combustible tobacco cigarettes.”
A recent warning by the Food and Drug Administration (FDA), which proponents of electronic cigarettes insist was based on a flawed, narrow study, have also contributed to the growing debate.
Salmon says the FDA study was extremely narrow in scope and failed to follow established scientific protocols. The Electronic Cigarette Association has called on the FDA to take a more scientific approach and to work with ECA members before making any hasty decision to ban electronic cigarettes altogether.
“We understand that to protect the public, some form of regulation may be necessary, and we welcome that,” said Salmon. At the same time, Salmons and his organization believe a ban would leave smokers without an alternative to combustible cigarettes, whose toxic substances and life-threatening health effects are clearly documented and which the FDA has no intention of banning.
All known e-cigarettes are imported to the U.S. and according to a report in the Wall Street Journal, the FDA considers them illegal because the agency feels they are either “unapproved drugs or medical devices.” So far, however, only 50 shipments have been blocked at the border. The agency is considering other enforcement actions against importers of these products and the domestic distributors. But, it is also facing litigation questioning whether the FDA has any jurisdiction at all over e-cigarettes.
The American Cancer Society has also joined the debate against the electronic devices, but as one anonymous supporter of electronic cigarettes points out on a popular website, “In criticizing e-cigarettes, the American Cancer Society has a blatant conflict of interest that it fails to acknowledge: a secretive multimillion dollar exclusive endorsement contract with GlaxoSmithKline (NYSE:GSK) to promote Nicoderm, Nicorette and Commit (which is why the ACS name and logo appear on all of these GSK products sold in the US), which almost certainly contains a non compete clause prohibiting the ACS from endorsing any competitor nicotine or tobacco product.”
Douglas Bettcher, the director of the World Health Organization’s Tobacco Free Initiative, told the Associated Press that “there’s no experience in pharmacology yet of nicotine replacement therapies which actually inhale nicotine in the lungs.” Replacement therapies such as skin patches and gum have undergone thorough clinical testing, Bettcher said. For these reasons, “the WHO does not consider the electronic cigarette to be a legitimate nicotine replacement therapy.”
This debate may continue to get more interesting for everyone involved, especially now that Wall Street appears to be taking sides.

Report of US Centers for Disease Control Show Downward Trend in Current Smokers

The US Centers for Disease Control and Prevention (CDC) have issued 2 reports, both published in Morbidity and Mortality Weekly Report and reprinted in the December 23/30 issue of the Journal of the American Medical Association, on smoking trends and secondhand smoke exposure in 2008.
“Approximately one in five U.S. adults smoke cigarettes, and certain subpopulations have disproportionately higher prevalences of smoking,” write S. R. Dube, PhD, from the CDC Office on Smoking and Health, National Center for Chronic Disease Prevention and Health Promotion, and colleagues. “Cigarette smoking continues to be the leading cause of preventable morbidity and mortality in the United States. Full implementation of population-based strategies and clinical interventions can educate adult smokers about the dangers of tobacco use and assist them in quitting.”
An analysis of data from the 2008 National Health Interview Survey showed that the proportion of US adults who were current cigarette smokers decreased by 3.5% during 1998 to 2008, from 24.1% to 20.6%. However, there was no significant change in that proportion from 2007 (19.8%) to 2008 (20.6%).
Of current cigarette smokers in 2008, 79.8% (36.7 million) smoked every day and 20.2% (9.3 million) smoked some days. An estimated 45.3% of smokers (20.8 million) had stopped smoking for at least 1 day during the preceding 12 months because they were trying to quit.
Of about 94 million persons who had smoked 100 cigarettes or more during their lifetime, more than half (51.1% [48.1 million]) were no longer smoking.
In 2008, the highest prevalence of smoking was in adults at least 25 years of age with low educational attainment (41.3% for persons with a General Educational Development certificate and 27.5% for those with less than a high school diploma vs 5.7% for those with a graduate degree).
The lowest quit ratios in 2008 were in adults with education levels at or below the equivalent of a high school diploma (range, 39.9% – 48.8%). During the 10-year period examined, smoking cessation for adults with low educational attainment did not change.
“Because persons with lower educational attainment generally have higher rates of smoking and are less likely to quit, evidence-based programs known to reduce smoking should be intensified among these groups,” the study authors write. “Health-care providers should take education level into account when communicating about cessation and smoking hazards to these patients.”
An accompanying CDC editorial note indicates at least 5 limitations of this report: self-reported estimates of cigarette smoking were not confirmed by biochemical tests, possible underestimates for certain racial/ethnic populations, a lack of generalizability to institutionalized populations and the military, limited information was available on former smokers, and small sample sizes were included for certain population groups (eg, American Indians/Alaska Natives).
“Effective population-based strategies for preventing tobacco use and encouraging tobacco use cessation (including enforcing bans on advertisement) are outlined in the World Health Organization’s MPOWER package,” the editorial states. “Despite partial bans on some forms of advertisement, the tobacco industry continues to conduct targeted marketing toward socially disadvantaged subgroups and vulnerable populations, such as persons with low socioeconomic status and youths. Offering and providing effective cessation counseling and treatments are integral to reducing the smoking epidemic, especially in subpopulations with high rates of smoking.”
Report on Secondhand Smoke Exposure
The second report analyzed 2008 Behavioral Risk Factor Surveillance System data from 11 states and the US Virgin Islands (USVI) on secondhand smoke (SHS) exposure.
“State variation exists in the prevalence of current smoking, in non-smoker exposure to SHS, and in the prevalence of persons who have completely smokefree rules for their homes,” write A. Malarcher, PhD, from the CDC Office on Smoking and Health, National Center for Chronic Disease Prevention and Health Promotion, and colleagues.
“SHS causes immediate and long-term adverse health effects in nonsmoking adults and children, including heart disease and lung cancer, and SHS exposure occurs primarily in homes and workplaces,” the authors note. “Smoke-free policies, including not allowing smoking anywhere inside the home (i.e., having a smoke-free home rule), are the best way to provide protection from exposure to SHS.”
SHS exposure in homes varied widely among states, from 3.2% in Arizona to 10.6% in West Virginia. For indoor workplaces, the range was from 6.0% in Tennessee to 17.3% in the USVI. Most persons surveyed reported having smoke-free home rules (from 68.8% in West Virginia to 85.7% in the USVI).
This report also provided 2008 findings for Behavioral Risk Factor Surveillance System–based state-specific estimates of current smoking in 50 states, the District of Columbia, and 3 territories (Guam, Puerto Rico, and the USVI). There was marked variation in self-reported cigarette smoking prevalence (range, 6.5% – 27.4%).
“Additional legislation is needed to increase the number of smoke-free workplaces and other public places,” the report authors write. “Health-care providers should continue to encourage persons to make their homes completely smoke-free.”
The accompanying CDC editorial note points out at least 4 limitations of these findings: the failure to survey persons without any telephone service or with only wireless telephones, that the estimates for cigarette smoking and SHS exposure were based on self-report, a median response rate of only 53.3%, and the determination of SHS exposure only for the 7 days preceding the survey.
“Enacting legislation that eliminates smoking in indoor work spaces and public places and encouraging persons to implement smoke-free home rules will protect persons from exposure to SHS,” the editorial states. “The Institute of Medicine recently concluded that SHS exposure can cause acute myocardial infarction (AMI) and that communities that enact smoke-free policies realize a reduction in hospitalization for AMI among the general population. All persons, including those with an increased risk for heart disease, can protect themselves from SHS exposure by avoiding indoor areas that allow smoking.”

State Officials Cut Expenses on Smoking Prevention Programs

According to a new report carried out by a coalition of health groups, State Legislatures are generating record profits cigsfrom tobacco giants and tobacco taxes but have been cutting the expenses on smoking programs more and more, and particularly in the state of New York.
The report, named “A Broken Promise to Our Children,” claims that governments had cut expenses by 15 percent, as they have spent a total of $567 million for smoking prevention and cessation programs in the fiscal year that ended in September.
On average, states have spent on prevention programs just 2.3 percent of nearly $25 billion generated from tobacco taxes and payments from the settlement agreement concluded with tobacco industry back in1998, the coalition claimed in their annual report.
Janice Payton, vice president of American Cancer Association said that it a complete non-sense that only a diminutive part of money collected from tobacco industry and taxes is virtually used to help people get rid of habit.
Under the current federal laws, state governments are not obliged to spend the tax money on programs related to smoking. Meantime, according to the National Conference of State Legislatures, state governments had to fill an aggregate budget hole of $145 billion in 2008 due to huge profit drops.
Report demonstrates that the tobacco-related profits have increased significantly as many stets have hike tobacco taxes to offset budget gaps.
The state of New York is home to the most significant cuts to programs related to smoking cessation, reducing the expenses by 31 percent, or more than $25 million, although they had very efficient cessation programs which helped to lower smoking rates to below nationwide level.
Other governments that reduced expenses on smoking-related programs by more than a half include Pennsylvania, Colorado, Washington and Maryland. According to the report, only North Dakota has not cut expenses on the programs, and kept programs at the rate advised by the Center for Disease Control.
NY State Governor David Paterson admitted that the State Ways and Means Committee had to cut the expenses on such programs to transfer the generated revenues to the general budget, to fill the $3 billion deficit.
Governor’s spokesman said they had to cut the funding due to an unprecedented fiscal emergency that the state is currently experiencing.
He mentioned that the State nevertheless managed to spend nearly $50 million on the cessation programs, as they have cut the expenses on advertisements only, but the quit lines have been working successfully.
However, the spokesman for the coalition of anti-smoking groups which made up the report said the budget holes can not be used to justify the cuts on prevention and cessation programs, since the generated tobacco-related revenues have grown.
According to a recent report by CDC, nationwide adult smoking rates has grown 1 percent in comparison to last year and is at nearly 21 percent. In addition, adolescent smoking rates sink from 36 percent to 20 percent.

Law hazy concerning e-cigarettes

As the statewide smoking ban in bars and casinos approaches its three-month anniversary, more smokers in Bozeman are turning toward electronic cigarettes as a way to get their fix from the comfort of their barstool.
Robyn DeMasi, manager of the tobacco shop chain Smoker Friendly in Bozeman, said there has been an uptick in sales of the product since the ban went into effect.
“There definitely has been,” she said. “People are looking for an alternative way to ‘smoke’ where they can’t now.
“A lot of that has been in the last three months.”
State health officials have backed down from their initial stance that e-cigarettes are illegal to use inside any public building under the Montana Clean Indoor Air Act that went into effect Oct. 1.
But the state is far from endorsing the products that the Food and Drug Administration says deliver at least one carcinogen to users, and hopes the federal government prevails in a lawsuit that would bring e-cigarettes under stricter regulation nationwide.
“This could be a public health problem, so we’re going to keep an eye on it and do what we can to discourage folks from using it,” said Linda Lee, Montana Tobacco Use Prevention Program supervisor at the Department of Health and Human Services.
When the law first went into effect, Lee told the Billings Gazette that e-cigarettes were considered by the department’s attorney as a “smokeable product” and banned indoors.
“For now, we see them as covered under the law,” Lee said in early October.
But Lee said that stance was brought into question, and the department has backed away.
“We, at this point, don’t feel that we can go into a place and say, ‘You’re using e-cigarettes. That’s a violation of the Clean Indoor Air Act,’” she said. “But at the same time, we’d like to.”
E-cigarettes work like this: Users put a solution in a cartridge, and then inhale. That draws the solution through a battery-operated vaporizer, replicating the smoke from a cigarette.
The FDA tested leading e-cigarette brands and found the vapor contains “carcinogens and toxic chemicals such as diethylene glycol, an ingredient used in antifreeze,” according to a press release announcing its lawsuit against e-cigarette manufacturers.
The federal agency is suing e-cigarette manufacturers, because the devises are being sold with no health warnings and are not regulated by the FDA.
Several tobacco shops surveyed by the Chronicle said they were not ordering e-cigarettes until the lawsuits are settled.
And Lee said she is quick to point out the lawsuit to people curious about the legality of e-cigarettes.
“Whenever a bar owner calls me, I give them a very long diatribe, saying that this is held up in a lawsuit,” she said.
But not everyone is shying away from carrying the device.
DeMasi said her store started stocking e-cigarettes n which retail for roughly $70 n six months ago, and since then have sold 20.
Jeremy Weiner, Smoker Friendly’s sales and marking manager in Denver, said the corporation began selling them a year ago.
“Everywhere we’ve put it, 85 percent of our stores, it’s done very well,” he said.
December 25, 2009
By DANIEL PERSON

Brain Scan Strategy vs. Tobacco Marketers

Ever wondered people still keep puffing away despite the fact that we’re better informed about the dangers of smoking than ever cigs shopbefore? And despite the fact that there are no ads around? And despite the fact that you can’t consider smoking inside but instead have to relegate yourself to a corner with nothing but a seedy over-filled ashtray for company?
I wondered why smoking remained so prevalent, given all these discouraging factors. My intrigue helped inspire part of the world’s largest neuromarketing study ever undertaken. Project Buyology scanned the brains of smokers as they were exposed to all the stuff we thought should be encouraging them to quit smoking. Like dire health warnings on the cigarette packs and those nastily graphic anti-smoking commercials.
The shocking revelation from this part of the study was that, as you will have noticed yourself, the health warnings and anti-smoking messages have no effect at all in helping people give up the habit. Even more astounding is the finding that these health warnings and other ostensibly discouraging messages have the opposite effect entirely. Instead of helping people to quit smoking, they in fact encourage them to smoke even more. At least, this is what the most sophisticated brain scanning now tells us.
So, where does this leave us? If health warnings, a ban on tobacco advertising, and tons of education about the risks of smoking don’t do the trick, what can we possibly do to save the hundreds of thousands of people dying from smoking-related diseases in the United States every year? Do we need even bigger warnings on packs? Even more graphic anti-smoking commercials? Or something totally different?
The tobacco industry seems to get it. In fact, more than any other industry I know of. I tend to refer jokingly to the fact that the ban on tobacco advertising made the industry as clever as it is. Thanks governments everywhere! However, neuroscience might be the tool the world needs to help us understand the truth and lies about why we buy, and the science of the desire to smoke.
If you ask the Brits, they are inclined to think that even the explicit health warnings – displaying gangrenous limbs, mouth cancers and amputation – plastered on cigarettes sold in Australia, Brazil, Thailand and Canada still aren’t instructive enough. And they may be right. For ethical reasons, Project Buyology was not able to test people’s responses to these graphic images. But despite us not being allowed to test these pictures, I believe that they have no influence in persuading smokers to quit. The British believe in blank packs. Yes, you read it correctly. Packs with no graphics, logos or messages. Just pure blank cardboard. My response to this is go for it – if you want young people to smoke even more.
Just think about it: if you’re a 16-year-old, those white boxes would look pretty cool and enticing. Nothing written on them, glowing anonymously in the midst of the commercial clutter around them. A quiet patch in the consumer landscape that’s apparently not clamoring for attention. Those understated, unnamed items would make little show, and great success, of getting a kid’s attention. The anti-commercial tone would spike a sense of mystery and plug into the underground spirit that’s ever-present in youth counter culture. No, in my opinion, blank packs are not the answer.
I believe the health warnings need to change. We’ve discovered, through Project Buyology, that cigarette pack health warnings have cultivated a Pavolvian effect in smokers. Smokers are stimulated to light up when they see the images, the warnings, the typeface the messages come in. We need to disrupt the vicious cycle that has developed. The thing is, smokers don’t read the warnings. They see a graphic which, in around 12 seconds, makes them feel good as they inhale nicotine. This cycle can only be broken by changing the health warning formats, composition and design frequently – I mean really frequently. Large formats, no formats, picture formats, red formats, on the back, on the front – you name it. The changes need to be dramatic and enforced often. This way the brain will not manage to link the health warning with pleasure.
But this is not the full answer. We need a comprehensive strategy to combat smoking. Cigarette packs offer are just one opportunity to influence change. The decision to quit smoking is not made when you’ve purchased a pack of cigarettes. It’s too late. “Oh what the heck,” I can hear the smoker say. “I’ll just finish off these last cigarettes…”. A year later, they’re still hooked. The tactic has to be found long before the consumer gets to the counter. The war has to be won before it begins. We need to make cigarette smoking uncool. Seriously uncool.
Health warnings, bans and scary ads aren’t working. If they were, we’d have seen a decrease in tobacco sales. The fact is, we’re all influenced by trends. Let’s use this human foible for our own good. Perhaps uncool means releasing a brand around the anti-smoking message – even merchandising. I know tobaccofreekids, which I respect greatly and work with, is on the job. But extra muscle is needed. And this is where things get tricky. Individually run anti-smoking campaigns won’t achieve a big enough voice, just as small cigarette brands hardly exist these days. They simply don’t have the power to cut through the other advertising clutter, or the budget.
The answer is a global campaign. A campaign with one of those mammoth budgets, funded at national level, and run as a global brand, like Gillette or Dove. This way the message might cut through the commercial noise and reach the kids who we know to be the main target group for the tobacco industry. After all, it’s easier to get hooked for life if you’re smoking by the age of 21. Online, wireless and through the tons of entertainment channels, the global campaign could be shaped into popularity and accessed worldwide.
It’s a project which might seem overwhelming. And it means thinking globally instead of locally. But I think by now we realize how global our communities have become. The world is connected through Facebook, YouTube, and Google. The fact is, serious action is needed. The tobacco industry is armed with a killer marketing weapon – a weapon sponsored by well-intentioned governments and supported by legislation everywhere. So let’s treat anti-smoking activities like brands, and beat the cigarette companies at their own game.
Brandingstrategyinsider
December 26, 2009

South Dakota misses Centers for Disease Control mark for tobacco prevention spending

Although South Dakota spends only 52 percent of what the Centers for Disease Control and Prevention recommends on tobacco prevention programs, state anti-tobacco activists say the money has been enough to make a significant difference.
In the past decade, South Dakota has lowered the rate of teenage smoking from 40 percent to 24.7 percent, said Dr. Allen Nord, a Rapid City physician and member of the South Dakota Tobacco-Free Kids Network.
“We’re making a huge difference in the lives of children,” said Nord, who points out that most adult smokers begin the habit as teenagers. “This money is saving lives.”
A recent report issued by the Campaign for Tobacco-Free Kids and other national health organizations criticizes states for not spending more on tobacco prevention programs.
The report finds that prevention spending has actually dropped by 15 percent in the past year.
And it’s not because tobacco funds have dried up.
States can fund prevention programs with money from the 1998 multi-state tobacco settlement, state taxes and federal grants. An estimated $246 billion dollars is being paid over a 25-year period from the tobacco settlement, and states collect about $25.1 billion a year in tobacco revenue.
The report shows that only North Dakota is funding tobacco prevention programs at the level recommended by the CDC ($9.4 million).
Thirty-one states and Washington, D.C. provide less than a quarter of the CDC-recommended amounts. New Hampshire is the only state providing no state funding for tobacco prevention, using just $1 million in federal grant money.
Nine states meet half of the CDC recommended levels.
One of those nine is South Dakota.
South Dakota ranks 10th nationwide and is expected to spend $6 million in 2010. The CDC, which calculates the suggested amounts based on population, recommends the state spend $11.3 million.
Jason Dilges, commissioner for the state Bureau of Finance and Management, said South Dakota does not receive payments from the tobacco settlement any longer.
In 2001, the state sold the rights to its ongoing settlement payments in exchange for a lump sum payment of $278 million. The sale shifted the risks to the bond holders and away from the state, Dilges said.
None of the $278 million, or the $70 million that had already been paid from the tobacco settlement, went toward tobacco prevention in South Dakota. It was placed into the Education Enhancement Trust, he said.
Instead, South Dakota looks to its own taxes to fund tobacco prevention programs.
In 2007, the state passed a tax increase on tobacco products, committing $5 million of that income each year to the state Department of Health’s tobacco-prevention program.
The state collects $57 million in tax dollars from cigarettes and $5.4 million from other tobacco products. The state’s general fund receives the first $30 million of that money. The Department of Health receives the next $5 million for tobacco prevention. The Property Tax Reduction Fund receives 33 percent, as does the Education Enhancement Tobacco Tax Fund. The Health Care Tobacco Tax Fund receives 34 percent, Dilges said.
The Department of Health also receives federal grants. In 2010, the state will collect a $963,000 federal grant, bringing the total prevention funds to $6 million.
Nord said South Dakota’s success at reducing smoking has been largely due to the Department of Health’s program. The program includes public education, a media campaign and a highly successful Quit Line. Through the Quit Line, smokers can be prescribed medication to help with smoking cessation, as well as counseling.
Nord said the Department of Health’s Quit Line is considered “one of the best in the country. A lot of states look at our Quit Line as a model,” he said.
While the CDC’s calculations indicate South Dakota should spend more, it’s probably not realistic and perhaps unneeded, Stalley said. The Department of Health has shown that it can be effective with its $6 million budget.
“We certainly believe at this time the Department of Health has adequate resources,” Stalley said. “As long as we can fund the Quit Line fully and media campaigns, I think that we’re seeing that the money dedicated now is adequate for doing that … But I wouldn’t want to see us pulling back from that.”
Pulling back is exactly what the report warns against.
The report urges states not to slow down or decrease funds, especially in light of the “remarkable” progress already made. In the report, the CDC notes that overall progress on adult smoking reduction has stalled since 2004. And while teenage smoking rates have improved, the fact that 20 percent still smoke is troubling. Government must not become “complacent” the report reads.
Nord and Stalley agree.
One of the most positive things about South Dakota’s prevention efforts is the promise of funding each year, Stalley said. “We have long advocated that the Department of Health be given adequate and sustained funding … we have accomplished that with tax dollars,” Stalley said.
Nord said that while he’s proud of the accomplishments that have been made in South Dakota, the fight against tobacco use is far from over.
As a family physician who sees patients every day with smoking-related illnesses, Nord sees the battle against tobacco use a critical one, both for humanitarian and financial reasons. Each year, the state of South Dakota pays $58 million through its state Medicaid program to deal with smoking-related ailments.
It doesn’t have to be that way. “$58 million and every single penny of that is preventable,” Nord said.
Contact Lynn Taylor Rick at lynn.taylorrick@rapidcityjournal.com or 394-8414.
December 26, 2009

S&P experts think FDA regulations threaten tobacco industry

According to a recently published S&P report, the groundbreaking Tobacco Control Act signed in June and providing the U.S. Food & Drug Administration with the authority to oversee tobacco industry would have significant impact on the industry as whole in the long-term perspective and result in huge risks.
The regulations allow the Agency to control production, naming, promotion and sales of all tobacco-containing products.
S&P’s senior analyst Charles Daniel said that although the latest regulations can change the competitive environment by halting the creation of new products and increasing the average expenses on doing business, the experts predict the new policies would not have an instant effect on the major tobacco companies.
However, the top three largest tobacco manufacturers – Altria Group Inc., owner of Philip Morris USA Inc.; Reynolds American Inc., proprietor of R.J. Reynolds Tobacco Co.; and Lorillard Inc., would be dramatically affected by the Act in the future.
Daniel said that the industry analysts agree in opinion the Lorillard may be hit the hardest by the FDA regulations, due to totally unclear situation with ban on flavored cigarettes and inclusion of menthol cigarettes into the list of banned products, taking into account that Lorillard is the overwhelming leader in the category of menthol cigarettes.
Another analyst at Standard &Poor rating services, Irina Demchyuk admitted that they rate tobacco industry using two major assumptions – cigarette sales volume and market share. And according to these assumptions, the current state of things the predictions for long-term perspectives are negative.
S&P as well recognizes the constant jeopardy also of subsequent sales declines that could result in downgrades in the next couple of years.
The analyst added that they consider the new policy could jeopardize the tobacco industry in the long-term prospects. The experts also share the opinion that the regulations could make it almost impossible to launch new products, and reduce consumer satisfaction by existing products due to the obligations to restrict the usage of many additives.
Moreover, in conformity with the Tobacco Control Act, the FDA will launch a Tobacco Advisory Committee that would assess issues concerning the usage of menthol in tobacco products. Though experts suggest that the Agency is not likely to ban menthol category completely, it could dramatically restrict the usage of this ingredient, what could have a significant negative impact on the industry, since menthol cigarettes account for one-third of all cigarette sales across the nation.
In addition, the report acknowledges that those companies who are willing to boost market presence through development of new products – including minor tobacconists that seek to introduce new brands – might face difficulties in implementing their strategies in conformity with the latest regulations. The Act also requires tobacco companies to stop marketing their smokeless tobacco products as healthier that ordinary tobacco products.
Experts also believe that increased expenses on development and introduction of new products could discourage many tobacco companies from innovating, obliging them to compete mainly on price. And last but not least, the regulations would make it harder for tobacconists to communicate with those smokers who are willing to try new products; therefore, the restrictions provide a hand of help to currently popular tobacco products and their manufacturers.

China's tobacco industry

Mengcheng doesn’t have the ring to it that Havana or Montechristo have. But for what this modest city in Anhui Province cigareteslacks in Caribbean romance it has in ambition, aiming to make its mark on the world with high-quality cigars. In true China style, rows of serious-looking female workers in grey overalls, hair in disposable white caps, roll brown tobacco leaf into fat fingers which are then shipped to another assembly line to be clipped, smoothed and stamped and boxed as Wangguan (“crown”) cigars, which are then sent across China and the US to be sold.
China’s tobacco industry as a whole is growing as ambitiously as Mengcheng. With the industry already contributing 8% to the country’s total tax income there’s little wonder China wants to be the largest tobacco exporter in the world by 2010, particularly because much of the cultivation takes place in the poorest rural areas of the country. But they must heed changing tastes, and a disorganized management system in order to achieve their goal.
HIGH SOCIETY
Cigars are currently only a minor luxury item in the massive tobacco industry, which makes the bulk of its money producing cigarettes. The industry is still a hopeless myriad of companies all managed under the loose banner of the State Tobacco Monopoly Administration (STMA). Chinese smokers bought 1.2 trillion cigarettes in the first 6 months of this year. That’s a 3.6% climb on the same period last year. But the rate at which sales are growing is down, by 0.5% in the first half of 2009 according to STMA figures. Sales slowed faster in the same period last year: 2.8% over the figures for the first six months of 2007.
The dip in sales growth — in volume terms — is connected with the industry’s drive towards consolidation and quality, says David Chia, a research analyst at the Singapore office of Euromonitor, which publishes an annual research report on China’s tobacco industry. The incredible diversity of brands in any Beijing cigarette shop (100 different labels were found in one city center shop) is slowly becoming a thing of the past thanks to an STMA-driven consolidation of the sector.
In 1993 the STMA oversaw nearly 3,000 cigarette brands nationally. By 2003 the number was 550. Analysts predict the number to reach 100 by 2010. Currently, ten dominant players account for 69% of overall cigarette sales (by volume) according to Euromonitor research. The government’s consolidation drive is obvious when you look at dominant players across various market tiers: Cheap cigarettes, going for under RMB 10 (USD 1.46) a pack, account for the bulk of overall sales volume. Three brands: Baisha, Hongtashan and Honghe lead the pack: each shifting 50 billion sticks in the first six months of this year, according to Euromonitor data. At the premium end of the scale, with packs costing RMB 25 or more, five brands hold 74% of the market: Furongwang, Chungwa, Yuxi, Huanghelou and Liqun.
LOCAL FLAVOR
With their typically red-gold packaging, Chinese cigarette brands are produced by local cigarette factories, under the management of provincial tobacco firms, which are in turn controlled by the STMA, headquartered in Beijing. Even more than auto-making or coal mining, China’s tobacco industry remains aligned with provincial government earnings.
In southern provinces like Yunnan, where the climate is suited to tobacco leaf growing, cigarette companies are behemoths. None other than the country’s largest cigarette producer by volume, Hongta, is headquartered in Yuxi, one-hour south of Kunming. The Yuxi factory takes its name from the surrounding city, located in a fertile agricultural valley which grows mushrooms, tea and tobacco. The flagship of the state-owned Hongta Group, the Yuxi plant hires a staff of 2,500 to produce an annual 2.5 million cases of cigarettes, including iconic local brands like Yuxi, Hongmei and Hongtashan, as well as the foreign brand West, owned by Imperial Tobacco.
This is where China’s cigarette industry began. In 1914, the local government, seeing the advantages of a mild, moist climate, imported tobacco seeds from the US and Turkey. Virgina-style tobacco seeds came to the province courtesy of American pilots flying out of Kunming during the 1940s war against the Japanese.
Hongta and the province’s other cigarette giant, Hongyun Honghe, have spent heavily on modernizing their cigarette factories with German-made Korber cigarette rollers and other imported gear. But they’ve invested equally in their huge tobacco growing operations. Both firms have learnt from global peers like Philip Morris how to improve crop consistency and leaf processing, using the flue-cured method — dried artificially, indoors — which China relies on for the bulk of the tobacco chopped and rolled into cigarettes. China produced 2.2 billion kilos of flue-cured tobacco in 2008, and STMA circulars are pointing to a 2.5 billion kilo crop for 2009.
MOVING MARKETS
Major lifestyle changes are currently impacting China’s largest cigarette consumers. Cigarette makers depend on the country’s tobacco-addicted working classes for the bulk of sales. Yet a perusal of STMA statistics for national sales shows an interesting shift in sales from the wealthier southeast provinces like Guangdong to inland regions like Henan and Hunan, mirroring the inland shift in migrant labor, following massive government infrastructure projects under the USD 586 billion economic stimulus plan.
The STMA has spotted the trend, says Li Ping, a section chief from Hongta’s marketing department in Yuxi. “A priority for 2010 will be improving the rural distribution networks, so we have more sales in rural and western areas of China as it’s clear that migrant workers and investment are both heading inland.”
A bigger problem could be that Chinese consumers are beginning to wake up to the health issues of smoking. Having ratified the World Health Organization’s Framework Convention on Tobacco Control, China — the world’s largest producer and consumer of tobacco — promised to warn its 350 million smokers of their addiction’s health hazards. But so far it’s doing so only reluctantly.
Rather than scaring people about the fact that one million Chinese die every year from smoking-related cancer, Chinese cigarette packs carry a polite warning in small print, on a background the same color of the rest of the box lest anyone might notice it. Packages in Hong Kong, by comparison, carry graphic imagery of lung cancer. The Chinese tobacco monopoly has meanwhile been reportedly taking advice from multinational cigarette firms on how to counter the scientific findings linking tobacco with cancer.
CASH CROP
This reticence may be explained by the state-owned tobacco industry’s 8% contribution to the country’s tax take, about USD 60 billion a year, and the lobbying power that comes with such a contribution. Yet even as STMA officials and provincial leaders fight for the industry, Beijing policy makers have vowed that a blanket ban on all publicity for tobacco products will be enacted from 2011.
Pressure on the public purse has strengthened the government’s hand, allowing it this year to hike taxes on tobacco while cancelling all tax deductions on advertising spending previously given to tobacco firms. To help pay for its economic stimulus plan, the government slapped a 56% tax on cigarette packs costing more than RMB 70, up from 45%. Tax on so called ‘medium grade’ cigarettes meanwhile was pushed from 25 to 36% and a VAT-type 5% tax slapped on wholesalers, though it remains to be seen how the latter is being enforced.
Aside from tax, the STMA continues to struggle with smugglers. It’s not hard to find illicit cigarettes in Beijing. When asked, a cigarette seller in the Sanlitun entertainment district whipped out a black plastic bag with a 10-pack of cigs4us.biz/marlboro-cigarette for RMB 10, with a health warning in French, cheaper than the RMB 15 equivalent box Marlboro makes in China through a joint venture between brand-owner Philip Morris and the China National Tobacco Company – also controlled by STMA. Various industry sources suggest as much as USD 5 billion worth of cigarettes are smuggled into the country each year, with legal imports by comparison accounting for only USD 665 million. Multinational tobacco firms have been accused of colluding with third party middle men who smuggle the cigarettes into major markets like China.
SOPHISTICATED LADIES
Challenged by rising taxes and the WHO-prompted push for more awareness about the dangers of smoking, China’s cigarette industry is looking to female smokers and exports for future growth. Up to 70% of Chinese men smoke but so far in most parts of the country less than 5% of women do, though that figure is already up to 10% in larger cities. As the last, untapped, frontier for the global tobacco industry, women have been the focus of new products.
Another focus, says Chia, is sales overseas. Those looking to exports include the Shanghai Tobacco Corporation, which has been distributing its Chungwa 500 brand through duty free shops across Asia. The firm won’t reveal sales figures, nor will the Changde Cigarette Group, whose Furongwang premium brand is distributed across Southeast Asia as well as Hong Kong and Macau.
THE OLE’ PLANTATION
While it may be raising awareness about the ills of smoking, China is vigorously promoting the growing of tobacco leaves. Though the country’s output is crimped by a shortage of arable land, the STMA’s well-trumpeted ‘Program for Sustainable Development of Leaf Tobacco Production’ envisages rural China becoming the world’s number one exporter of tobacco, with 150 million kilos a year by 2010.
It intends to reach that goal by chiming in with the government’s policy of a wealthier rural China. STMA-paid experts have fanned out across poorer provinces like Anhui and Gansu, training villagers in how to grow and tend tobacco. Elsewhere, the STMA has encouraged mechanization and the use of IT (even sending SMS messages of advice to growers) to lift the yield per hectare.
And in “tobacco towns” entire cities are developed around cigarette companies. Opulently appointed, the Hongta headquarters is nestled between lushly landscaped gardens ringed by tea and tobacco plantations. Going against a planned ban on tobacco publicity perhaps, there is a public park with pine and leafy shrubs and a giant silver-coloured smoking pipe. On the other side of wide Hongta Dadao Street, named for the cigarette company, locals exercise by climbing the steps of a to-scale replica of the red pagoda after which the brand is named (Hongta translates as “red tower”).
In Mengcheng, meanwhile, there’s no shortage of ambition. A factory floor manager good-naturedly reveals there were plans to employ pictures of Che Guevara and Fidel Castro to market the cigars in China, until provincial officials nixed the idea.
The secretive nature of the factory management and the reticence of the parent cigar factory owner, China Tobacco Anhui Industrial Corporation — and, in turn, the STMA — makes it hard to assess the marketing plans of China’s tobacco industry. Yet it’s clear that consolidation will continue, as will the shift to premium products, and exports. China has no plans to kick its most dangerous, and lucrative, habit any time soon.
By Mark Godfrey | From CIB December 2009

E-cigarettes under Fire for Selling Devices to Kids

Using a hidden camera, reporters of the ABC15 Channel visited several malls in Phoenix and other Arizona cities, and found e-cigaretesmany of them are selling the electronic smoking devices, known as electronic cigarettes to adolescents.
Well, it should be mentioned that electronic cigarettes are legal products. However, it is very controversial whether the devices are not harmful for human consumption.
Adnan Guzun owns four e-cig kiosks throughout Phoenix, and states that the devices are a huge help for those who are eager to give smoking ordinary tobacco.
He said that e-cigs work the same as other nicotine replacement therapies, such as gums, but the makers of these devises have made them looking like cigarettes and even emitting a vapor, so that a user thinks he is smoking, tricking his habit.
Electronic cigarettes indeed look like ordinary cigarettes and deliver a mist similar to tobacco smoke, but as alleged containing only water vapor.
The smoking gadgets even offer a large variety of flavors. In addition e-cigs contain nicotine, what should make them comply with the Food and Drug Administration regulations.
This summer the FDA reported about hazardous chemical substances found in several samples of e-cigarettes, including diethylene glycol, a cancer-causing toxic substance. So, it is not clear to many parents, why these devises are selling everywhere without any restrictions and any teen could buy them. Exactly this question David Gerick sent to the Arizona Public health Department, after talking to his son, aged 16, who came from local mall with his friends.
Mr. Gerrick said his son returned from the mall, excited and told him that they have found a brand-new gadget in one of the kiosks, and it was looking like a cig, but not harmful. However, Matt Salmon, former Congressman from Arizona, famous for his efforts to introduce public smoking ban across the City, said that people and health groups have gone crazy about e-cigs.
Currently, Mr. Salmon is the president of Electronic Cigarette Association, claiming that the retailers of these products face very strict requirements: they do not state that the devices are safer, they do not sell the products to adolescents. And, they do not sell any flavored cartridges.
“We market our products only among long-term smokers willing to get rid of their deadly habit,” said Salmon.
However, ABC15 reporters discovered just the contrary. They have used a hidden camera, and visited a “Smoking Everywhere” kiosk in one of malls located in Phoenix.
They discovered a shocking thing: the salesman not only did state that electronic cigarettes would help to overcome pneumonia, but he sold the device and cartridges to a minor buyer.
The reporters had asked Mr. Gerick to permit his son James, to go to the kiosk and ask to purchase one electronic cigarette and 5 cartridges. The salesman sold him the products. Without asking him for his ID. James is only 16.
The reporters contacted the owner of the kiosk, and he stated it was a dramatic mistake and it would never happen again.
However, two weeks later the same boy came to that kiosk and the same salesman sold him 10 refill cartridges. Once again, he never asked for his ID.
More than a dozen of countries across the world banned or restricted the use and sales of electronic cigarettes, but the U.S federal officials still hesitate. However, many states are in the process of adopting their own measures.

What is Obama smoking?

Apparently, the debate over the economy is over, and it’s settled science that government spending stimulates growth. womanAt least that’s what President Obama wants you to believe. On CBS’ “60 Minutes” on Dec. 13, he boasted, “What we now know, and every economist who’s looked at it will acknowledge this, is that [the stimulus] helped us [stem] the panic and get the economy growing again.” Mr. Obama’s exaggerations are starting to sound a lot like Al Gore’s claimed “consensus” about global warming – a formerly hot topic that has cooled down recently.
Also on Dec. 13, Lawrence H. Summers, Mr. Obama’s top economic adviser, professed on multiple news shows that since the economy didn’t lose as many jobs in November as it had lost in January, that proves the $787 billion stimulus package saved the economy. Mr. Summers cited forecasters, saying most agree with him that unemployment will start improving in the spring. That’s a bit of a yarn since the 52 forecasters surveyed each month by the Wall Street Journal predict virtually no change in unemployment through June. But, in any case, that indicator does not imply things would have been worse without hundreds of billions in government spending.
Mr. Summers somehow fails to use that same yardstick – what forecasters were predicting – when evaluating how the stimulus has performed up to this point. Back in February, before the stimulus plan was passed, the 52 business economists and forecasters expected the unemployment rate this month to be at 8.8 percent, showing only a small increase from the 8.2 percent level of 10 months ago. Instead, the unemployment rate is hovering at 10 percent.
White House predictions were even more rosy, and off base. On Feb. 28, with the stimulus already passed, the Obama administration’s own forecast predicted an average unemployment rate for the year of just 8.1 percent. Despite the unemployment rate being 2 percentage points above what his own team promised, the president trumpets that his policies are working. Give us a break.
None of this is surprising. At the beginning of the year, we predicted many times that this big increase in unemployment would occur, precisely because of the stimulus.
Moreover, if Obama officials really want to take credit for changes in the unemployment rate, they are going to have to try to explain why the U.S. unemployment rate is soaring much faster than the rate in other countries. As Fox News reported earlier this month: “Among the 21 countries with available data for unemployment from January to October, the U.S. experienced the second biggest increase, going from 7.6 percent to 10.2 percent (a 2.6 percentage point change). The average increase for the non-U.S. countries was just 0.8 percentage points, just one-third what we experienced. Only Ireland faced a larger increase.”
Many times this year, Mr. Obama and his economists explained away the problems and griped that it was hard to turn the economy around because there was a worldwide recession. The troubled economies in the rest of the world supposedly were dragging down the American economy. This line of argument makes no sense given that our downturn was larger than just about everybody else’s dip.
The president refuses to admit the truth of the matter – that the economy was going to get better if the so-called stimulus had never passed. Whether one looks at the predictions of forecasters or the Obama administration’s own predictions, the implications are the same: Mr. Obama’s policies delayed the recovery.