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Tobacco companies launched tea sticks to counter EU

flavour ban

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Within months, some European regulators move to close

loopholes

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EU government likely to set tougher rules bloc-wide

By Emma Rumney

LONDON, March 28 (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 ( PM )

and British American Tobacco ( 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 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.