The decision by the US Food and Drug Administration (FDA) to ban certain flavoured e-cigarette cartridges, subject to them being cleared by the FDA's premarket tobacco application (PMTA) process, is a 'credit positive' move in the long term for the tobacco sector, Moody's has said.
In a sector comment, Moody's noted that the ban is likely to have 'no immediate effect' on the credit quality of the tobacco companies it rates, either because they had already removed these products from sale in anticipation of the FDA's decision, or because they do not sell these products.
Regulatory Clarity
In the long term, however, the announcement will be credit positive for the sector, 'because it provides regulatory clarity and a degree of stability for the US vaping market after several months of uncertainty and disruption'.
The FDA has already accepted and started to review a number of premarket applications for flavoured e-cigarettes, it said, under the PMTA process, with British American Tobacco having submitted a PMTA application for its Vuse Solo brand.
If firms can demonstrate to the FDA that products meet a specific public standard, including measures to prevent their use by young people, said products could be authorised for sale.
'The FDA's statement effectively confirms that the US regulator generally views vaping products as potentially viable alternatives to smoking if adequately regulated and that vaping will provide tobacco companies with a sustainable alternative market in which to operate,' Moody's said.
Sustainable Regulation
Last week, British American Tobacco said that the new regulations bring the industry one step closer to sustainable regulation.
Commenting on the legislation, British American Tobacco CEO Jack Bowles said that the announcement "takes us a step closer to a predictable regulatory environment in a key marketplace, but focus must now shift to enforcement to ensure vapour market regulations are effective.”
BAT has long been campaigning for a regulatory framework for its range of vapour based products, Bowles added.
“For us, smart regulatory frameworks partnered with responsible marketing and appropriate enforcement will ensure the sustainability of adult consumer choice across all categories," he said.
Bowles also highlighted the importance of vaping products in providing an alternative to cigarettes.
“Millions of adult tobacco consumers are looking for an alternative to cigarettes and it’s important to remember that properly regulated flavours can play an important role in the choice of adult tobacco consumers to transition to vapour products as an alternative to cigarettes," he said.
© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine
