Though talk of banning flavored tobacco and vaping products is dominating news stories these days, it’s hardly a new phenomenon. A menthol ban, for example, has been up for consideration by the U.S. Food and Drug Administration (FDA) since the Tobacco Control Act first granted the agency oversight over tobacco products in 2009.
While any action by the FDA must follow an official years-long rulemaking process, city and local governments have been much swifter to act. Anna Bettencourt, senior category manager for Massachusetts-based VERC Enterprises, said she’s seen a “patchwork” of flavor bans emerge in different towns during the past decade. At first the bans were limited to fruit, alcohol and candy flavors, but like the Tobacco Control Act, exempted menthol.
That didn’t last long. When cities like San Francisco and Minneapolis successfully passed menthol bans in 2018, others quickly followed suit. By November 2019, more than 60 local governments had passed tobacco flavor bans that include menthol. “They do it very quickly; there’s not enough opportunity for people to realize they’re doing it,” said Lyle Beckwith, senior vice president of government relations at NACS. “There’s no checks and balances.”
Passing flavor bans at the state level has proved to be more difficult. Massachusetts is the only state that has banned the sale of flavored tobacco products. It is also levying a 75% excise tax on e-cigarettes as state officials aim to curb a spike in underage vaping.
Despite the lack of widespread action at the state level, increased pressure about what former FDA Commissioner Scott Gottlieb described as a “youth vaping epidemic” and a rising number of vaping-related illnesses last summer lead many to believe flavors might be banned at the federal level. The White House indicated in September that it would instruct the FDA to move quickly on flavors. “White House action is not a rule: It’s a proposed guidance,” explained Beckwith. “It’s basically an enforcement discretion. Rules take years, which is why they’re doing this by guidance.”
On November 21, 2019, the president hosted a meeting with invited representatives from public health groups and the tobacco and vaping industries—including NACS President and CEO Henry Armour—aimed at finding what the president described as “an acceptable solution to the vaping and e-cigarette dilemma.”
“I appreciate President Trump bringing stakeholders together today to discuss the best path forward on vaping policy,” Armour said of the meeting. “I shared with the president our industry’s view that any policy in this area should advance our health goals, be based on data and apply equally across the economy in order to be effective.”
While the administration has not given a timeframe on any action, this is not the only option for a federal flavor ban. In November, Chairman Frank Pallone Jr. of the House Energy and Commerce Committee introduced legislation that would ban all flavored tobacco and vape products via congressional action.
As the industry waits to see what, if any, action is taken at the federal level, here’s a look at what we do know about who wins and loses when a flavor ban is enacted at any level.
Loser: Virtually Every Tobacco Category
As mint and menthol have started to be included in tobacco flavor bans, retailers are understandably panicked about the implications for the cigarette category, which accounts for 31.01% of in-store sales per NACS State of the Industry data. Management Science Associates (MSA) data show 36.7% of all cigarette sales in the convenience channel are menthol. “If you cut out a third of the business in one of the top categories, that’s significant,” said Don Burke, MSA’s senior vice president.
Flavors also are clearly important to the vapor category: MSA data show 78% of convenience cartridge sales are either a flavored or mint/menthol product.
Flavor bans hit hard in the more traditional OTP categories as well. “While people think a lot about vapor, keep in mind that flavors are still incredibly important for cigars,” said Burke, noting that more than 57% of cigar sales in convenience are flavored.
Bettencourt added that VERC has seen as much as an 80% drop in its cigar business when flavor bans have been enacted. Yet she’s even more concerned about what recent mint/menthol bans mean for her smokeless category, where she estimates 95% of sales are some form of mint-flavored. “If you take away mint, menthol and wintergreen, that’s our smokeless category,” she said.
If there’s any glimmer of hope for retailers looking at as much as 95% of their category sales being banned, it’s that history suggests at least some consumers will consider tobacco-flavored products when other options are taken away. When JUUL pulled its flavor pods in 2018, MSA data show an uptick in mint, menthol and even tobacco-flavored sales.
“There’s some saving of business,” Burke cautioned, adding “but it’s minor as compared to consumers that will just look elsewhere.”
Winner: The Black Market
History shows that when a once-legal product is banned (or taxed/restricted into an effective ban), a black market will bloom.
In the current patchwork of local bans, consumers can simply drive to another city to legally purchase banned products, while illicit retailers or individuals bring in products from lower taxed and lower regulated states. It’s a phenomenon Lonnie McQuirter, director of operations for 36 Lyn Refuel Station, has witnessed firsthand in Minneapolis. “When you take a product that’s legal and regulated and taxed, then move it out of the hands of responsible convenience retailers, you create a huge opportunity for the black market,” he said. “It’s upsetting.”
That opportunity grows tenfold should products be banned at the federal level. “Those products aren’t going to go away—people are going to obtain and sell them illegally,” Bettencourt predicted.
And a win for the black market is a net loss for public health. As Beckwith pointed out, the “black market doesn’t sell properly regulated cigarettes, so you don’t know what’s in them. It doesn’t check ID, and it sells more things than just cigarettes.”
Even President Trump cited a potential black market for flavors as “the one problem I can’t seem to forget.
“If you don’t give it to them, it’s going to come here illegally,” Trump said at the November vaping meeting (see sidebar on page 38). “Now, instead of having a flavor that’s at least safe, they’re going to be having a flavor that’s poison.”
Ironically, last summer’s vaping illnesses that prompted the calls for flavor bans ended up proving the risks of an unregulated black market. In a November news briefing, the Centers for Disease Control and Prevention identified a form of vitamin E found in illicitly obtained THC vaping products as a “very strong culprit” in illnesses. “That’s proof positive that the black market is alive and well,” Beckwith said. “In the absence of any scrutiny, you don’t know what’s going in a given product.”
Loser: Mainstream Retailers
When Minneapolis first proposed a ban on menthol products, MSA did an in-depth economic impact study on what the proposal would mean for local convenience retailers. They predicted the ban could cost Minneapolis convenience stores as much as $50 million in lost tobacco and ancillary sales and as much as $168,000 per store annually.
Unfortunately, retailers like McQuirter and Bettencourt have seen these threats come to fruition. “It doesn’t just hurt just the categories they’re banning,” said Bettencourt. “They’ll stop to get their coffee, their gas, their breakfast for the day at a spot where they can get their preferred tobacco products.”
Adding insult to injury, many of the flavor bans enacted at the local level have exempted “adult-only” retailers such as vape shops and tobacco shops. Beckwith credits former FDA Commissioner Gottlieb with pushing the false narrative that vape shops do a better job at age verification. “The FDA’s own data clearly point out that convenience stores do a far better job than any other retail channel,” said Beckwith.
Since the FDA started conducting retail inspections, the convenience industry has averaged above a 90% compliance rate. By comparison, a 2018 study published in the American Journal of Health Promotion found that vape and tobacco shops were 100 times more likely to sell a vapor product to a minor than a convenience store. “Convenience checks more IDs on a daily basis than the TSA—and we have a higher rate of success,” said McQuirter. “We’re a chief proponent in doing what’s best for the public.”
It’s a message that retailers need to communicate during comment periods on any proposed regulation—as Armour did in the meeting with President Trump—and through their votes. Beckwith notes that while the Pallone bill to ban flavored products is unlikely to pass a Republican-controlled Senate, that could change in 2020.
What won’t change anytime soon is the increased pressure facing menthol, mint and other flavored products. “Everyone is racing for political expediency instead of looking at the issue,” he said. “They want to burn down the forest to get rid of a hornet nest.”