- Call for tobacco sales to be phased out
- Vaping market could benefit although heath alarms rising
A government-commissioned independent review into smoking in England could cast off the shackles around vaping and send tobacco taxes higher. E-cigarettes have been a grey area for health bodies given the relative newness of the technology and lack of evidence around long-term risks, but now the government could try and thread the needle of moving smokers onto vaping without encouraging non-smokers to take up the habit.
The review was led by former charity boss Javed Khan, who said tobacco companies should be taxed more to fund initiatives focused on lowering the smoking rate. His ideas came in response to the government’s aim of a “smokefree 2030”, which despite its name would see smoking rates fall to around 5 per cent.
The recommendations did not go as far as the call from the All Party Parliamentary Group on Smoking and Health to limit tobacco company net profit margins to 10 per cent, with the rest handed over as taxes, but could see significant changes for big tobacco players.
The government will respond to the findings of the Khan review in a health disparities white paper, which is due this year and could potentially be released before Parliament’s summer recess, which starts on 21 July. It is unclear which recommendations will be implemented by ministers, with the Guardian reporting that there is scepticism in government about Khan's conclusions.
The former Barnardo's boss also recommended progressively increasing the legal age at which people can buy tobacco products in England to create “a smokefree generation”, and called for a hike in duties and the banning of sales online and in supermarkets, toughening the trading climate for tobacco manufacturers. The age rule would increase the age of sale of tobacco products from aged 18 by one year, every year, eventually banning items such as cigarettes. New Zealand has introduced a similar policy for those born after 2008, and Denmark is currently considering proceeding with a likeminded approach.
England is an important market for Imperial Brands (IMB), as the UK represents around 14 per cent of sales. England is less critical for British American Tobacco (BATS), the UK contributing 1 per cent of total revenue.
But single-country efforts can have a global impact on smoking policy, as shown by the plain packaging movement started in Australia a decade ago. The Tobacco Manufacturers’ Association (TMA), which represents the views of BATS and Imperial, told Investors’ Chronicle that an eventual ban on the sale of tobacco products would remove the right of consumers to make their own decisions and would drive smokers towards “illegal channels”.
A spokesperson said that “prohibition always has serious unintended consequences and opens the door to the sale of illicit products by criminal gangs, as we saw in South Africa, following a temporary ban on tobacco products” and that it would "make enforcement and education much more difficult and present challenges for retailers”.
Another of Khan’s recommendations is the requirement of a tobacco license for retailers, which would be needed to legally sell tobacco and which would limit where products could be sold. The review calls for the banning of sales online, in duty-free areas, and in supermarkets – Aldi and Lidl are retailers which already do not stock tobacco.
Alongside this more difficult regulatory landscape would come an immediate and significant increase in tobacco duties by more than 30 per cent. Making tobacco products more expensive would impact demand and convince smokers to quit, “bringing immediate benefits in health and wealth”, the review said.
The review also calls for the government to promote vaping as a “quit tool”, as a means of drawing people away from tobacco use. Khan wants all smokers to be offered vape alternatives, the state to launch a “vaping facts website”, and clinicians to feel able to recommend vaping devices to smokers, but the review is also clear that young people should be dissuaded from taking up vaping and non-smokers shouldn’t start vaping.
Vaping companies like Aim-traded Supreme (SUP) could stand to benefit from the implementation of this section of the review.
Supreme said that the outlook is positive for the vaping market, given the government’s aim of making England smokefree and “recognising e-cigarettes as a healthier alternative to smoking”. The company acquired the UK vaping manufacturer Liberty Flights this week for an initial consideration of £7.75mn, a purchase which is in line with its “strategy to support a tobacco free UK by offering both credible and safer alternatives for nicotine consumption.”
Imperial Brands said that it shared the government’s "long-term commitment to vaping, and are pleased to see further recognition of the role that vaping can play in support of public health policy”. In the company’s latest interim results its next-generation products (NGP), which includes its vaping offering, took 3 per cent of net revenue, and saw a 9 per cent jump in net sales in the six months to 31 March off the back of "strong progress across all categories in Europe".
