TI Digest

The headquarters of Royal Agio Cigars group in Duizel, The Netherlands.

THE NETHERLANDS

Scandinavian Tobacco Group acquires Royal Agio Cigars

DUIZEL, THE NETHERLANDS—Scandinavian Tobacco Group has acquired from Highlands Beheer B.V. all the shares of Agio Beheer B.V. the holding company of the Royal Agio Cigars group.

Royal Agio is a European cigar company with a strong cigar portfolio including key brands such as Mehar's, Panter and Balmoral.

The company is based in Duizel, The Netherlands, and has approximately 3,200 full-time employees. Royal Agio’s reported annual net sales for 2018 were EUR 133 million with an EBITDA of EUR 18 million.

Agio has had a factory in Sri Lanka since 1985. The more than 1,500 people who work here process the tobacco that will be used as binder and wrapper leaves. The bales of raw tobacco are delivered to our factory in Sri Lanka straight from plantations in countries such as Indonesia, Brazil and Ecuador.

Agio also operates a hand made cigar factory in San Pedro de Macoris, Dominican Republic, and its flagship machine-made cigar factory and packaging facility in Westerlo, Belgium. The company’s Duizel headquarters also houses the company’s warehouse and distribution facility.

Royal Agio will provide Scandinavian Tobacco Group access to a strong product portfolio and important market positions in key European machine-made cigar markets. The acquisition secures leading positions in France, Belgium and The Netherlands and significantly improves the position in other key cigar markets such as Spain and Italy.

CEO of Scandinavian Tobacco Group, Niels Frederiksen said the acquisition of Royal Agio significantly strengthens STG’s position in several key machine-made cigar markets in Europe and enables delivery of an even more attractive range of cigars of the highest standards to its consumers.

“The acquisition leaves Scandinavian Tobacco Group as a bigger, more competitive and more profitable company better suited to pursue growth and create value for our shareholders.”

Royal Agio is a family-owned business founded in 1904. Royal Agio’s products are sold in about 90 countries with the majority of net sales generated in The Netherlands, Belgium, France, Germany, Italy and Spain.

UNITED STATES

Is Altria’s Juul Investment the Worst Deal of All Time?

RICHMOND, VA—Altria took one bad review after another from critics over the winter as its investment in Juul Labs became increasingly less appealing.

In a harsh but really not atypical assessment, the online publication O’Dwyer’s excoriated the transaction as being perhaps the “worst deal of all time” with the likelihood of getting worse.

“The number of lawsuits have jumped by 80 percent since October,” wrote O’Dwyer analyst Kevin McCauley, and he noted that there could be further adverse developments in pending or future cases.

Altria’s original investment of $12.8 billion for a 35 percent stake in Juul Labs had already been written down by $4.5 billion in October, and another $4.1 billion in mid January.

“It said the latest charge is primarily due to the increased number of legal cases pending against Juul and the expectation is that the number of legal cases will continue to increase,” wrote McCauley. “The rapidly shrinking value of Juul is now pegged at $4.2B.”

Donation Platform to Support an Outdoor Protection Agency

RICHMOND, VA—General Snus, a smokeless tobacco brand from Swedish Match, and Leave No Trace, one of the world’s premier outdoor protection agencies, have partnered to launch the Trailkeepers Project.

The Project will assist in protecting the great outdoors by raising funds for environmental initiatives, asking consumers to take a conservation pledge and encouraging people to get out and explore the natural world.

“We will continue to work with the FDA throughout the implementation of this new regulatory framework to make sure consumers have access to quality-assured products whilst doing our utmost to ensure that vaping remains positioned as a credible option for smokers looking for an alternative to tobacco,” said Bowles.

“Swedish Match has remained committed to operating with sustainability as a key pillar of our business throughout its history,” said Jason Walker, Assistant Brand Manager, Swedish Match. “We’re thrilled to take our contributions toward a sustainable future one step further with the introduction of the Trailkeepers Project.

“Through this initiative, General will donate over $50,000 to Leave No Trace to support wildlife, protect our environment and promote conservation efforts. We’re proud to enter 2020 in strong partnership with such an upstanding organization.”

Now through March 2020, consumers can participate in the Trailkeepers Project by visiting the General Snus website to learn more about three Leave No Trace initiatives eligible for receiving the brand’s donation:

• Respect Wildlife,

• Minimize Wildfires or

• Pack It In, Pack It Out programs.

Each of these programs address a variety of environmental challenges. Participants have the opportunity to vote daily for the cause they feel most passionate about during the promotional period.

Beginning in April, General plans to further elevate the Trailkeepers Project and the brand’s contributions to the environment by asking consumers to commit to a conservation protection pledge on the General Snus website.

Consumers will be encouraged to share that pledge on Facebook. General will donate $5 to Leave No Trace for each pledge commitment, and another $5 to the organization for each Facebook share, up to $100,000. Results achieved through the Trailkeepers Project will be revealed in October 2020.

The Trailkeepers Project will be supported by additional marketing materials, including special packaging, point of sale, direct mail, email and more. All collateral will direct consumers to the General Snus website where they can vote to fund their favorite environmental cause.

INDUSTRY OPINION —JACK BOWLES, CEO BAT

A Properly Regulated Vapor Category Continues to Provide a Credible Alternative to Smoking

British American Tobacco (BAT) has welcomed the U.S. FDA’s recent acknowledgment that a properly regulated vapor category continues to provide a credible alternative to smoking, while also highlighting the important issue of preventing the access and appeal of vapor products to youth. Following a significant period of disruption and uncertainty, this regulatory clarity is a welcome step towards returning the U.S. vapor market to stability.

British American Tobacco Chief Executive Officer Jack Bowles noted, “Yesterday’s announcement takes us a step closer to a predictable regulatory environment in a key marketplace. But focus must now shift to enforcement to ensure vapor market regulations are effective.

“We have long said it is not the marketing of these products per se that is the concern, it is the irresponsible marketing of them that should be robustly addressed. Smart regulatory frameworks partnered with responsible marketing and appropriate enforcement will ensure the sustainability of adult consumer choice across all categories.”

The guidance the FDA has provided, together with the previously announced requirement to submit PMTAs by May 2020 for all products, is a positive step and will help ensure consumers have access to appropriately regulated, quality-assured products that do not appeal to or are accessible to youth. The guidance is clear that flavors can return to the market place once they have been cleared through the PMTA process.

“Millions of adult tobacco consumers are looking for an alternative to cigarettes and it’s important to remember that properly regulated flavors can play an important role in the choice of adult tobacco consumers to transition to vapor products as an alternative to cigarettes.”

“Our U.S. subsidiary, RAI Group, has already submitted one brand PMTA for VUSE Solo and is well positioned to submit applications for the remaining VUSE portfolio ahead of the deadline of May 2020. We are confident that, as required by the PMTA process, all VUSE products will be shown to be appropriate for the protection of public health.”

BAT has long argued for sustainable regulatory frameworks for its new category products. BAT believes in providing adult consumers with vapor systems that are hard to adulterate; providing new category products which are supported by world class science and product stewardship; offering a range of flavors which ensure adult consumer satisfaction whilst not appealing to youth; and marketing freedoms to drive category adoption among adult consumers.

Trump’s Solution to Vaping Controversy: Fire HHS Secretary Azar!

WASHINGTON, D.C.—The debate on whether some or all vaping flavors should be banned in the U.S. took an absurd turn late in November in a meeting at the White House called by President Donald Trump to trade ideas on the issue.

Participants included public-health advocates, vaping company executives and representatives of almost every segment of the economy that has a stake in vaping.

A number of solutions were proposed, and one participant noted that a radical conservative organization had earlier demanded that the secretary of the federal department of health and human services Alex Azar be fired for a lack of anti-vaping zeal.

“Fire Azar? Best idea I’ve heard all day,” the president said, according to Bloomberg News and other news outlets.

He soon made it clear that he was only joking, but the comment shows how intractable this issue has become. Azar attracted the wrath of some organizations because he favors banning all vape flavors except “tobacco.” This was not much different than the initiative the President had been talking up in recent weeks.

But Trump’s administration has wavered on such a proposal and now seems to claim neutrality on the issue.

There are several parties to the debate that think vaping should be banned together.

Trump ruled out an outright ban. “If you don’t give it [nicotine tobacco] to them, it’s going to come here illegally,” he said.

But Trump has since apparently decided that there is no satisfactory solution to the problem, at least not satisfactory to him. In a call out of the White House, according to several news organizations, Trump said to Azar, “I should never have done that f---ing vaping thing.”

No agreement on vaping agreeable to all or even most parties involved had been proposed by press time.

US Secretary of Health and Human Services Alex Azar, shown here noticeably unconcerned about a recent “threat” to his job security.