UNITED STATES
The US Food and Drug Administration’s (FDA) new policies to restrict sales of most flavored e-cigarettes to age-restricted stores and pursue bans on menthol cigarettes and flavored cigars is unlikely to hurt the tobacco industry.
Stefanie Miller, an analyst with Height Capital Markets, says the role of flavors in enticing both adults and children into nicotine addiction is as of yet unclear. She also said there are many types of products on the market and smokers are likely to substitute another cigarette product for those that have been banned or discontinued. "If the goal was to close the spigot on these products, I don't see this as doing that at all," said Miller. “I was surprised the FDA didn't come out stronger."
A report by analysts Bonnie Herzog and Patty Kanada at Wells Fargo Securities says that for traditional cigarettes, there may not be enough scientific evidence to prove that menthol is any more dangerous or more addicting than other products. Herzog and Kanada also say the industry is also likely to challenge a ban in court and that any ban would be at least two years away. "We continue to believe an ultimate ban of menthol in cigarettes is very unlikely. We think the tobacco industry would mount a forceful defense."
In the report, they also suggested that instead of a ban, the FDA could restrict or lower the level of menthol in cigarettes.
According to Miller, both traditional tobacco companies and e-cigarette companies will continue to invest heavily in vaping and e-cigarette products, competing on price and design while also working to educate smokers about their benefits versus combustibles. Also, e-cigarettes tend to have higher margins than traditional tobacco products and are less likely to be deadly.
Miller said, "People are moving to e-cigarettes and that isn't going to change. These regulations won't slow the investment by these companies. In fact, they incentivize them to produce even more products for current users."