Published: Thu, November 15, 2018
Finance | By Loren Pratt

FDA Plans To Ban Menthol Cigarettes

FDA Plans To Ban Menthol Cigarettes

Experts said the ban could impact upon a business generating as much as a quarter of BAT's annual earnings.

The WSJ report claimed officials at the US Food and Drug Administration (FDA) were planning to impose the ban, which comes just days after the FDA announced plans to curb sales of flavoured e-cigarettes. Doing so would be a step toward eliminating or tightly limiting use of the popular cigarette flavor, something the FDA has been considering for some time.

An Altria spokesman said Monday it was premature to comment absent an FDA announcement.

Imperial Brands, maker of products including Lambert & Butler, Davidoff, Gauloises and John Player Special, saw its share price fall by more than 3%. The stock had declined 11 percent this year through Friday's close.

Worries about a ban on sales of menthol cigarettes in the USA wiped more than £8bn off the value of British American Tobacco yesterday as the blue-chip company suffered its biggest fall in more than four years. Menthol products sold in the US account for about a quarter of the company's earnings.

BAT owns Newport, the leading menthol brand in the U.S., and sales of the mint-flavoured products there are estimated to bring in a quarter of the company's revenues, according to analysts at Morgan Stanley.

But it is thought that a ban could take up to two years to come into force.

The former has taken a bigger hit as it owns the Newport brand of menthol cigarettes after acquiring Reynolds American a year ago.

E-cigarette makers argue the devices help adult smokers give up cigarettes - potentially saving them from related illnesses - by giving a nicotine fix without the smoke and smell of combustible cigarettes.

E-cigarettes and their liquid nicotine flavors would continue to be sold in dedicated vape stores, where the FDA believes age verification procedures are more reliable. It's unclear how long it would take for such a plan to take effect and tobacco companies could drag out the process by challenging a ban.

Menthol cigarettes account for around 35 percent of total industry volume in the U.S., Herzog said.

Newport is BAT's largest menthol brand and accounts for about 40 percent of US sales, according to Duncan Fox, an analyst at Bloomberg Intelligence.

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