As retailers continue to await legislation and clear guidelines from the Food and Drug Administration (FDA), it is more important than ever to stay informed and up to date on the current state of the tobacco category.
Recently, CStore Decisions caught up with industry professionals in an exclusive webinar that discussed the topic. Presenters included David Spross, executive director, National Association of Tobacco Outlets (NATO); Kalen Frese, director of merchandising and warehouse, Warrenton Oil Co.; and Michael Junk, manager of public and government affairs, QuikTrip Corp.
The webinar was moderated by CStore Decisions Editor-in-Chief Erin Del Conte.
To kick off the talk, speakers dove into one of the most pressing subjects for the tobacco industry today, which is the final rule from FDA regarding a ban on menthol and characterizing flavors in cigars, which had been expected in March.
NATO’s Spross said he believes that the upcoming election will play a part in forthcoming legislation.
“I think it’s more and more likely this issue will get punted until after the November elections,” noted Spross. “And I think a big reason for that is the engagement that all the industry has done on the issue. If you look at the process that the rules have gone through, there were over 250,000 comments filed on the menthol and the flavored cigar rules, and overwhelmingly, the majority of those comments were in opposition.”
If the menthol and flavor ban were to take effect, retailers are concerned that it may have negative effects on the industry and the country as a whole.
Warrenton Oil’s Frese mentioned that his worry would be that the legislation would create an illegal black market for former law-abiding smokers to purchase their tobacco products.
Frese also said that the exclusion of menthol products would shake up Warrenton’s backbar significantly.
“For us, menthol is about 28% of our cigarette business, so that’s obviously going to change kind of the way we set up our fixtures and things like that,” he said. But, he added, there is “definitely an opportunity to expand on vapor products, of course, that are approved. And then the nicotine pouch products that are out there. We’ve been kind of building in extra space for those products as things shift in that direction with the consumer. And I guess that’s really independent of a menthol ban, but we would shift probably quicker if that was something that came up.”
Spross brought up the fact that if the ban were to take effect, it is not something retailers would have to immediately implement.
“If the final rule is dropped, let’s say tomorrow, it will not take effect tomorrow. There will be at least a year sell-through date once the final rule is released,” he mentioned. “And additionally, the other thing you have to keep in mind, there will likely be legal challenges to the rules. And so that year effective date could be pushed out even further.”
The FDA also made known its intentions to introduce a proposed rule on maximum nicotine levels in cigarettes this April, following the finalized rules of cigars and menthols in March. Now, as March comes to a close, there still has been no word from the FDA about a final rule on a ban on menthol and characterizing flavors in cigars, making it likely that the proposed rule on maximum nicotine levels will be delayed as well.
“The other thing to realize is that there’s a nine-step federal rulemaking process, and while those flavored cigar and menthol rules are in step eight of this nine step process, (an expected proposed rule for maximum nicotine levels) is way in the beginning,” noted Spross. “So, if a rule is proposed, it’s got to go through a bunch of different steps where there’s public comment periods and there’s adjustments to the rule. And so, we’re talking a multi-year process. I think some in the industry have speculated seven to 10 years before anything can be finalized in this space, if not much longer. I think that’s a conservative estimate.”
Paving A Way Forward
The question for retailers now is how to prepare and make their voices heard to the powers that be.
“It’s important to stay engaged. These rules have been kind of floating out there for a number of years, and it can get a little monotonous in terms of constantly engaging,” said Spross. “But I will say, engagement from the stakeholders within the industry makes a difference.”
This type of engagement from the industry has played a large part in the delay of the flavor ban.
Spross also added that the enforcement actions the industry has seen from the FDA will continue and evolve.
A guiding factor in the enforcement process is the data gathered from the National Youth Tobacco Survey, which Spross said the FDA uses to determine many of its decisions on the subject.
“The National Youth Tobacco Survey that comes out in the fall every year kind of guides the FDA and how they’re going to enforce products. And so, that youth survey that came out last October showed that ELF Bar was the highest or the preferred brand amongst youth,” said Spross. “What you’re seeing is a response to that, and FDA focusing in on, that flavored disposable product, in particular. I think you’re going to continue to see these enforcement actions as we move forward.”
Spross mentioned that it is important for retailers to keep an eye on the products they have in the backbar, especially those that have not filed for a premarket tobacco product application (PMTA).
“I think it’s important for folks when they’re looking at which products to sell to, at least ask, have you filed the PMTA, and where does that stand? Has it been accepted for review? Because I think what you’re going to continue to see is increased enforcement from the FDA,” he added.
Frese agreed that the main thing retailers should focus on right now is staying informed and engaged. He mentioned that retailers depend on suppliers to accurately report about where their products stand in the PMTA process, but it is also on the retailers to be accountable and attentive.
For more on the discussion, register for free to watch the webinar recording on demand here.