By Emma Rumney
LONDON (Reuters) - European governments are weighing the introduction of tougher rules on cigarette makers' new zero-tobacco heat sticks, moving to close the loopholes they were designed to exploit just months after their launch.
Big tobacco companies including Philip Morris International (NYSE:PM) and British American Tobacco (NYSE:BTI) announced the launch of the sticks, made from nicotine-infused substances like rooibos tea, late last year as a way to counter an incoming European Union ban on flavoured heated tobacco products.
The European Commission said it was currently evaluating EU tobacco laws and any changes would be subject to the findings of that effort, public consultation and an impact assessment.
But, already, authorities in Latvia, Lithuania and Croatia are looking to introduce stronger regulations to govern the products, officials from the three countries told Reuters.
In Latvia, a draft bill would classify the zero-tobacco sticks as tobacco substitutes and subject to related controls, as well as a ban on all flavours except for tobacco from 2025, a health ministry spokesperson said.
"We plan to regulate them in future," a spokesperson for Croatia's health ministry agreed, adding they were addictive and had potential health risks. The person did not respond to requests for further information.
Regulation of such products is also being discussed internally in Lithuania, but it was too early to say what was on the table, a Ministry of Health spokesperson said.
German authorities, meanwhile, are in a dispute with some manufacturers over whether existing tobacco tax laws cover the new products, according to a spokesperson for the Federal Customs Authority.
BAT (LON:BATS) said it supports the introduction of evidence-based regulation and appropriate excise taxes for its zero-tobacco sticks, adding 15 EU member states have already introduced excise duties.
PMI also believes any nicotine-containing cigarette alternative should be regulated and taxed appropriately, a spokesperson said, adding however flavours play an important role in encouraging adult smokers to switch away from smoking.
REGULATION RISKS
Zero-tobacco sticks make only a tiny contribution to tobacco companies' revenues, which still overwhelmingly come from cigarettes.
But they marked a significant strategic development that companies trumpeted to investors as examples of innovation that can help them operate within ever-stricter regulations targeting their other products.
In some markets, the sticks have been growing fast. In Czechia and Romania, they already accounted for half of all sticks sold for BAT's heated tobacco device in December, with the figure at 30% in Germany and 19% in Greece.
BAT, which had launched its product in 11 European markets as of February, plans to roll the sticks out globally.
PMI's product is available in Czechia. It plans further market launches this year and is also set to launch more flavours, according to market intelligence firm NGP Trends, citing trademark applications by the company.
A spokesperson for Czechia's health ministry said it wasn't currently preparing any regulation for zero-tobacco sticks. Romania's health ministry did not respond to requests for comment.
Countries including Belgium, Slovenia, Switzerland and Poland are however also working on regulations or taxes for such products, according to analysts at market and regulatory research firm ECigIntelligence.
The European Commission meanwhile will likely shut down loopholes bloc-wide when it next updates EU tobacco laws, said Malcolm Saxton, senior consultant for chemistry at regulatory consultancy Broughton, adding it is likely considering controls on flavours, marketing and more.
To fend off regulations that could limit their products' appeal, tobacco companies would need to provide evidence the products play a role in reducing the harms of smoking and change the perception they exist only to circumvent regulation, he continued.
BAT says data to date suggests that its product potentially has lower risk compared to cigarettes, but researchers have warned that the health effects of such products are unknown.