A proposed ban on menthol cigarettes might seem like another nail in the coffin for the cigarette industry, including Reynolds American’s 2-million-square-foot Tobaccoville plant. But analysts say the proposal, announced in mid-November by the Food and Drug Administration, isn’t likely to have much of a short-term impact on the traditional cigarette business.
Menthols account for 35% of cigarettes sold in the U.S. Newport, a menthol produced by Reynolds, is the No. 2 cigarette in the U.S. with a 14% overall market share.
The reason for the proposed regulations, which also include restricting e-cigarette flavors, is to prevent kids from smoking. Youth smokers are more likely to smoke menthols than any other age group, and “Juuling,” or vaping, has become more widespread among high-school kids — e-cig usage among that age group is up 78% from 2017. Health effects of vaping are still unknown, as many of the chemicals in them are FDA-approved for ingestion rather than inhalation, according to researchers at UNC School of Medicine.
“The data show that kids using e-cigarettes are going to be more likely to try combustible cigarettes later,” FDA Commissioner Scott Gottlieb, a cancer survivor and father of three, wrote in the November report.
But analysts say there might not be enough scientific evidence to prove menthol is more dangerous than other products. Also, the cigarette industry would probably challenge a ban in court, with the process likely to take at least a couple of years.
The FDA directed its Center for Tobacco Products to revisit its compliance policies, and the agency also plans to solicit additional public comments on the proposed changes. If a final rule is published, other government agencies can review it before any congressional action.
In a Dec. 12 update, British American Tobacco, which acquired Reynolds in 2017, noted that it has years of experience managing regulatory change. “We are constructively engaging regulators and supporting evidence-based regulation,” the company said.
Though the effects won’t be immediate, pressure from the FDA could eventually take a toll on Reynolds. While the company hasn’t released workforce figures for some years, the Winston-Salem Journal estimates the company employs between 2,500 and 3,000 people in Forsyth County. Reynolds acquired the Newport brand in its $27 billion purchase of Greensboro-based Lorillard in 2015.
U.S. Sens. Richard Burr and Thom Tillis pushed back on the proposed menthol ban, issuing statements questioning Gottlieb’s strategy.
“It is troubling … that an administration that pledges to put America first is targeting legal, American-made products instead of focusing its attention on states that flout federal drug laws,” Burr said.
Tillis said, “I applaud the FDA’s commitment to developing a robust plan to combat underage use of e-vapor products. However, I hope the FDA revisits some of its actions affecting traditional products that have been marketed for decades.”