First the FDA Will Come for E-Cigs, Then It's Coming After Menthol

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The U.S. Food and Drug Administration (FDA) is expected to announce this week that it plans to impose severe restrictions on the sale of flavored e-cigarette pods. While the first batch of restrictions may not include menthol, the agency also is considering a ban on menthol flavoring that would extend to ordinary cigarettes, not just e-cigarettes.

Five e-cigarette makers had until yesterday (Sunday, November 11) to submit proposals on how they would control and combat e-cigarette use among young people. The five e-cigarettes were Juul, British American Tobacco PLC’s (NYSE: BTI) Vuse, Altria Inc.’s (NYSE: MO) MarkTen, Imperial Brands’ Blu E-cigs, and Japan Tobacco’s Logic.

Altria already has said it is removing all its flavored pods from sale except for menthol and tobacco flavors. When (as seems likely) the FDA bans the sale of menthol cigarettes, the menthol pods also will go.

The ban on flavorings is being proposed in order to halt sales of pods to underage vapers. The ban on menthol cigarettes is the result of an FDA study that concluded that menthol cigarettes are more difficult to quit and may pose a more significant health risk than unflavored varieties. The tobacco industry (surprise) disputes the FDA’s conclusions.

Particularly hard hit will be British American’s Newport brand of menthol cigarettes, which the London-based firm acquired three years ago for $25 billion when it bought Lorillard. According to The Wall Street Journal, menthol cigarettes accounted for 55% of British American’s U.S. sales last year and about 20% of Altria’s 2018 sales.

British American’s American depositary shares traded down about 8% Monday morning, at $38.40 in a 52-week range of $38.35 to $71.44. The low was posted earlier in the morning.

Altria shares traded down about 2% to $62.15, after opening at $61.14, in a 52-week range of $53.91 to $74.38.

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