In the c-store industry, compliance with regulations isn’t merely an issue of legality; it’s the foundation of a responsible business.
Nowhere is this more evident than in the realm of vape products. For convenience store retailers, ensuring compliance in the face of ongoing marketing denial orders (MDOs) isn’t just a box to tick — it’s an important component of maintaining trust with customers, avoiding expensive penalties and safeguarding the integrity of the business. But a lack of clarity from the Food and Drug Administration (FDA) over the past year and confusion over product legality has made vape compliance an especially fraught issue for many retailers.
Many c-store retailers shared that they felt uncomfortable discussing the vape category at this time given the regulatory heat around the category at present.
In recent months, the FDA has been seen stepping up enforcement actions against illegal vape products. In May, the FDA announced that thus far it has issued more than 670 warning letters to manufacturers, importers and distributors for illegally selling and/or distributing unauthorized new tobacco products, including e-cigarettes, as well as issued more than 550 warning letters to retailers for the sale of unauthorized tobacco products.
In addition, the FDA has filed civil money penalty complaints against more than 55 manufacturers and more than 100 retailers for the manufacture and/or sale of unauthorized tobacco products. It has also sought injunctions against seven manufacturers of unauthorized e-cigarette products in coordination with the U.S. Department of Justice (DOJ), and it has seized unauthorized e-cigarette products valued at more than $700,000 in coordination with the DOJ.
At press time, the FDA had most recently issued warning letters to 14 online retailers for selling unauthorized e-cigarette products that are allegedly popular among youth, targeting brand names such as Elf Bar/EB Design, Esco Bars, Funky Republic, Hyde, Kang, Cali Bars and Lost Mary.
To date, the FDA has only extended marketing granted orders (MGOs) to 23 flavored-tobacco e-cigarette products and devices. “These are the only e-cigarette products that currently may be lawfully marketed and sold in the U.S.,” the FDA said in a May statement.
Still, many retailers have expressed confusion over how to handle products that are in the premarket tobacco product application (PMTA) process but have not yet received an MDO or MGO. What’s more, a number of vape manufacturers have taken legal action to dispute the FDA’s MDO decisions, which has resulted in emergency stays on products while these lawsuits work their way through the courts, adding to retailer confusion over which products are safe to sell and where any given product is in the approval process.
“While chain stores with limited vaping offerings may navigate regulatory waters relatively unscathed, those catering to adult consumers through disposable vaping products operate under constant FDA scrutiny,” noted Gregory Conley, director of legislative and external affairs, American Vapor Manufacturers Association, which represents independent vapor manufacturers across the U.S. “Although warning letters precede fines for non-compliant sales, the specter of FDA intervention looms large, challenging retailers’ ability to meet consumer demands effectively.”
Like many retailers, Cubby’s, which owns and operates 37 convenience stores and supermarkets throughout Nebraska, Iowa and South Dakota, has so far taken a wait-and-see approach to MDOs from the FDA, noted Mike Wilson, chief operating officer, Cubby’s Inc. He pointed out that most of the MDOs that involve a major manufacturer are immediately met with a civil suit and a stay.
FDA Targets
In a CStore Decisions March webinar titled “How FDA Rulemaking is Changing the Backbar,” David Spross, executive director for the National Association of Tobacco Outlets (NATO), shed some light on the FDA’s recent crackdown on illegal products. He pointed out that the Reagan-Udall Foundation’s evaluation of the FDA’s Center for Tobacco Products’ (CTP) operations included an audit, which criticized the agency’s lack of transparency regarding the PMTA progress and lack of enforcement around illegal products.
“What I think you’ve seen since that report is the FDA stepping up its enforcement efforts, which it has done,” Spross noted.
Spross further noted that the FDA looks to the National Youth Tobacco Survey that comes out each fall to help guide how the agency focuses its enforcement. The survey showed that Elf Bar was the preferred brand amongst youth that use vape products.
“What you’re seeing is a response to that and the FDA focusing in on that flavored disposable product in particular,” Spross said.
Specifically, the FDA noted that the 2023 National Youth Tobacco Survey found that, of the more than 2.1 million youth who reported currently using e-cigarettes, more than 50% said they used Elf Bar products and more than 20% reported using Esco Bar products.
NATO has put out a list of vapor products that the FDA appears to be targeting most heavily in its enforcement actions (see sidebar on the left).
“We went through the last, I want to say two-and-a-half years of enforcement actions that the FDA has filed, and that’s how we came up with the list,” Spross noted.
Once again, products that have high youth usage appear to be the FDA’s top focus in terms of enforcement.
Spross also noted that it’s also important to be aware of products that have not filed a PMTA. But federal regulations aren’t the only thing c-store retailers need to worry about.
“While federal regulations are important, it is more imperative to stay up to date on any new local legislation affecting the areas we serve,” noted Wilson.
For example, some states have introduced legislation to implement vape directories that would make it clear which products are legal to sell. Proponents of the directories say they give needed information that has been absent from the FDA. Opponents, however, dislike the added regulation that in some cases includes fines for retailers. At press time, Alabama, Louisiana, Oklahoma, Wisconsin, Florida, Kentucky, Utah and Virginia had all passed legislation to implement such directories.
Wilson pointed out that in his marketing area, the Iowa Legislature recently passed bill HF 2677, requiring all vapor devices sold to be included on a state registry. “Those not registered would be illegal to sell. The governor has yet to sign the bill. I am keeping a close eye on this so we can react accordingly,” he said.
Improving Transparency
In response to criticism over its lack of transparency, the FDA launched the Searchable Tobacco Products Database (STPD) at the end of March. The STPD is a “new user-friendly list of tobacco products — including e-cigarettes — that may be legally marketed in the U.S.”
The FDA noted that the database is designed to serve the public, and especially retailers, by consolidating this information in one location with an easy search capability. It can be accessed at Fda.gov/searchtobacco, and the FDA plans to update it monthly.
According to the FDA, the database will provide information on three categories of products: 1.) new tobacco products that received marketing authorization through one of FDA’s three pathways to market a new tobacco product; 2.) preexisting tobacco products established through a voluntary determination program (commercially marketed as of Feb. 15, 2007); and 3.) provisional tobacco products that were removed from review.
“CTP remains committed to enhanced transparency in a way that is useful, timely and user friendly,” said Dr. Brian King, director of the FDA’s Center for Tobacco Products, in a statement. “We hope that this database will be an asset to stakeholders — including retailers — that will be used to help facilitate compliance with the law.”
Vape Sales
As regulatory decisions are hashed out, c-stores must still focus on serving today’s adult vaping customers.
“Despite the FDA’s malfeasance around the category, the demand for flavored vaping products among American adults remains strong, with an estimated 11 million adults choosing to use disposable vaping products,” Conley said. “This underscores a fundamental economic principle: Where there’s demand, there will be supply. …”
Inflationary pressures, however, are impacting the vape segment in convenience stores. Price per unit rose 8% for the 52 weeks ending April 21, with unit sales down 7.9% even as dollar sales, buoyed by price increases, dipped only slightly by 0.5% to $7.13 billion for the same period.
“In our stores customers are defiantly looking for discounts on pods,” Cubby’s Wilson said, noting that it was resulting in a slight decline in unit sales. “When those discounts aren’t available, a few customers are trading down from a four-pack to a two- or single pack, but the majority aren’t returning. They are asking for high-puff-count disposable devices.”
Wilson also sees a steady number of independent vapor stores opening in Cubby’s market area, adding to the competition for sales.
In 2024, Wilson expects vape sales to slowly trend downward. “If the governor of Iowa signs HF 2677 (the PMTA directory bill), I think we will see that part of our market flatten or even increase.”
