It’s been three months since outgoing U.S. Food and Drug Administration (FDA) Commissioner Scott Gottlieb announced draft guidance for flavored tobacco products, noting, “We expect that some flavored e-cigarette products will no longer be sold at all. We expect that other flavored e-cigarette products that continue to be sold will be sold only in a manner that prevents youth access, while premarket authorization for these products is sought from the FDA by 2021.”
The guidance outlined FDA’s plans
- to end current compliance policy as it applies to flavored electronic nicotine delivery system (ENDS) products such as electronic cigarettes, other than tobacco-, mint- and menthol-flavored products;
- to prioritize enforcement of such products offered for sale in ways that pose a greater risk for minors to access these tobacco products;
- to require manufacturers of all flavored ENDS products, other than tobacco-, mint- and menthol-flavored, that remain on the market under these new conditions to submit premarket applications to the agency by Aug. 8, 2021.
Acting Commissioner Ned Sharpless, who replaced Gottlieb, is the director of the National Cancer Institute and supports restrictions on e-cigarettes.
In the National Association of Tobacco Outlets (NATO)’s review of the draft guidance, the association noted FDA could take enforcement action to prevent convenience stores, service stations, drug stores and grocery stores from selling these other flavored e-cigarette and vapor products. The guidance may also allow retailers to create an age-restricted area within the store to sell these products.
On the heels of flavor regulation, age restrictions are on the docket. At press time more than a dozen states had raised the purchase age for tobacco products to 21. U.S. Senator Mitch McConnell, R – Ky., also proposed a federal bill to raise the purchasing age for all tobacco products — including vape — to 21.
This April, the FDA began cracking down on manufacturers, selling and/or distributing nicotine-containing e-liquids with labeling that looks similar to that on prescription cough syrups.
“My biggest concern is potential flavor regulations,” said Reilly Robinson Musser, vice president of marketing and merchandising for Rotten Robbie. “It will reduce the choices our customers have in our stores, affect our sales and put c-stores at a disadvantage to other channels of trade, such as vape shops and the internet.”
Robinson Oil Corp.’s 34 Rotten Robbie c-stores in California sell Vuse, Juul and blu. “The pods are the best sellers — Juul and Alto,” Musser said.
Currently, Rotten Robbie is replacing its old backbars with new shelving. “As we do that, we are reducing the amount of space allocated to cigarettes, making space for smokeless and cigars and increasing the space for e-cigarettes,” Musser said.
When California upped the age for purchasing tobacco to 21 years ago, Musser noted the effect on sales was minimal.
Already, states, cities, stores and manufacturers are taking matters into their own hands ahead of pending regulations.
“We were proactive with our key supplier partners and have already eliminated most flavored products, especially any that appeal to minors or youth,” said Derek Gaskins, senior vice president of merchandising and procurement for Yesway, which operates 150 c-stores in nine states. “Adult consumers are seeking mint, natural tobacco and other sophisticated flavors, and we plan to meet their needs.”
In fact, Gaskins noted that since consolidating to only these flavors, sales have been up “significantly.”
Gaskins expects Yesway can continue to grow sales with effective pricing strategies, impactful promotions and loyalty offers, noting, “We are expanding space in our backbar sets for e-cigs. …”
Gaskins said the category has evolved from mostly disposable e-cigs and is now dominated by vape and e-juice cartridge systems, primarily Juul and Vuse, which make up about 99% of the chain’s vape sales.
When it comes to age restrictions, Gaskins said, “We believe in a level and equitable playing field. If the 21 age limit is national, we believe that levels the landscape and doesn’t create arbitrage opportunities across state lines.”
Plaid Pantry dedicates a four-foot fixture to vape. Like Yesway, Plaid Pantry has already taken steps to comply with future flavor regulations.
“We have voluntarily made the decision to only carry tobacco, mint and menthol flavors,” said Tim Jones, director of marketing for Plaid Pantry, which operates 108 c-stores in Oregon and Washington. “Once there is resolution on the state and federal level in regard to other flavors, we may reconsider. Even when we did carry some of the other flavors, tobacco and minty were the best sellers.”
Plaid Pantry’s vape offering includes several brands of vape kits, refill pods, charging accessories and single-use items. The chain doesn’t sell straight e-juice. “Brand wise, My Blu and Juul are the top sellers,” Jones said. “Customers are also leaning towards the higher nicotine level refills.”
Jones expects the e-cig category to see continued low to mid-double-digit growth through 2019.
“We fully support and comply with all regulation around the control of age restricted product,” Jones said. “All responsible retailers should be allowed to sell items in this category. Regulations that would restrict product sales to 21-and-over establishments only would be unfair to responsible retailers and adult consumers.”
Plaid Pantry already operates in markets where 21 is the legal age for tobacco sales. “We have applied the rule to vape as well,” Jones said. “We experienced very little fall-off in sales when we implemented this decision.”
What Jones is concerned about is the “overly aggressive taxation” being considered in both of the states where Plaid Pantry operates, which “could also create a barrier to entry for new consumers attempting to switch from smoking.”
In April, e-cigarette manufacturer Juul announced it was testing a new program called Track & Trace to help prevent underage vaping. The program provides a web portal where adults can report vape devices they’ve confiscated from a minor by inputting the serial number from the Juul device. From there, the company plans to identify the source of the sale. Last year, Juul announced it would restrict sales of nearly all flavored pods to the internet.
Drugstore chain Rite Aid announced in April it planned to remove all e-cigarettes from its stores within 90 days, citing an increased number of underage youth using the products.
Many cities already have flavored e-cig bans, and a number of states are considering bills to ban flavored e-cigs. Lawmakers in Hawaii this spring considered a bill to ban flavored tobacco and e-cigarette liquids. But the House Finance Committee killed the bill, saying teenagers could continue to get the products online even if they were banned.
At press time, San Francisco was considering a ban on sales of e-cigs that aren’t approved by the FDA — in other words, all e-cigs. Already, the city prohibits the sale of flavored e-liquid and flavored e-cigs.
The proposed ban on e-cigs from San Francisco is “bad news,” noted Gregory Conley, president of the American Vaping Association, as other states and cities could see this as the new model and attempt similar legislation.
But, the future of flavors is the imminent concern. Now that Juul has pulled its flavors, Conley noted a lot of retailers have expanded their offerings with Vuse, Alto, Blu and NJOY.
“The fear is flavor bans in general are marching ahead,” Conley said, pointing to multiple cities and states that are proposing or enacting legislation.
Depending on the contracts c-stores have with their distributors, if a vape flavor ban went through tomorrow, most products may be able to be returned, Conley said. C-stores “probably should not be making any huge orders for flavored products. But it’s going to take time for FDA to go through all the comments and issue the final guidance.”
“Because FDA is doing a run around on rule making. This is not a rule. This is ‘guidance,’” Conley said. Guidance, in theory, goes into effect the day it becomes final, but Conley expects the FDA to offer a short, 30-90 day compliance window before it begins enforcement.
Conley also noted that in Minneapolis, where menthol and flavors were restricted to adult-only stores in 2018, c-stores began building a section or separate tobacco store attached to their c-store to continue sales. “That very well could be a new model. Particularly, I think, in places where there aren’t tons of tobacco shops and vape shops to start selling these flavors,” he said.
But questions remain. “I don’t think FDA has made clear what exactly is needed,” Conley said. “Is a curtain okay? Do you need a doorman checking ID on everybody who walks in? There’s still a lot of unanswered questions.”
The move to push the age requirement to purchase all tobacco products including e-cigs to 21 could prove beneficial, Conley noted, as it could push legislatures to view vaping products the same way they look at alcohol.
Opportunity in Innovation
Yesway’s Gaskins expects vapor to continue to grow. “As tobacco companies continue to raise prices on their legacy products, customers will continue to look for alternatives,” he said.
At Yesway, adult vape consumers are demanding consistent performance, flavor innovation and systems that are easy to charge and swap out cartridges into, as well as quality products at a reasonable price.
“If they invest in an alternative product, they expect it to perform each and every time they use it. We believe this leads them to look to the market leaders. They are also looking for a variety of flavors, strengths and package sizes to meet their taste profile and budget.”
For example, Yesway stocked Juul 2 Count Pods and 3% Nicotine Pods at its locations, and three of these styles are now in the Top 10 in unit sales across the entire chain, with one coming in at No. 3, Gaskins said.
Despite the ongoing regulations, Gaskins expects innovation to continue to drive the category. “…As less harmful ways emerge to deliver nicotine to adult consumers, it may create opportunities to grow sales, and deliver products that are clearly better for consumers than what has existed prior.”