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Big Tobacco has long argued unlicenced vapes are illegal

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With sales under pressure, the industry is shifting its

stance

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BAT plans to pilot new vape, lacking required licence

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Campaigners say plans unlawful and risk public health

By Emma Rumney

LONDON, Aug 21 (Reuters) - British American Tobacco ( BTI )

for years fought the sale of unauthorised, disposable

vapes in the U.S. - the world's largest market for smoking

alternatives - lobbying lawmakers and arguing aggressively in

court that they were illegal.

But with rivals eschewing government licences and the market

now worth billions, it's preparing a U-turn.

"Not having access to this world weighs on our company's

bottom line," Luis Pinto, spokesman for BAT's U.S. unit Reynolds

American, told Reuters as it prepared to test launch its first

new disposable product in the United States since an influx of

unregulated rivals hammered its sales.

Reynolds' disposable vape brand Vuse One uses

laboratory-produced synthetic nicotine and has an application

pending with the U.S. Food and Drug Administration. Pilot sales

will start in late September or early October, Pinto told

Reuters exclusively.

Campaigners, however, accuse the company of putting

profits above public health. And the FDA, which regulates

nicotine products, told Reuters that going to market without an

FDA licence, as BAT intends to do, would break the law.

"All new tobacco products ... that are on the U.S. market

without the statutorily required premarket authorisation from

the FDA are marketed unlawfully," it said.

The agency did not comment specifically on BAT's strategy

when asked by Reuters, but it said a pending application did not

create a "legal safe harbour to sell a product."

Pinto said BAT was not adding to the illegal market and its

approach would differ to unauthorised rivals: its products have

been subject to due diligence, will be sold via large national

retailers and their features and marketing will follow stricter

policies.

"It's not about, if you can't beat them, join them," he

said.

Public health authorities and researchers are divided over

how to weigh the potential benefits of vaping - mainly helping

smokers switch away from cancer-causing cigarettes - against

risks, including underage use.

Booming sales of unregulated disposable vapes, often

produced by Chinese companies, have exacerbated divisions. Some

offer exceedingly high nicotine hits or flavours like "rainbow

bubblegum" and "cookie butter" that critics say are targeted at

youth.

The FDA is meant to assess vape products before they go to

market and issue licences to those it finds to be, on the whole,

beneficial to public health: reducing the burden of smoking

without causing new problems, like a surge in youth sales.

But it has struggled to keep up with a massive influx of

applications, leading to long delays in authorising products for

sale.

In the meantime, big tobacco companies - many of whom are

awaiting FDA licences - have watched from the sidelines as the

market has exploded.

BAT estimates U.S. single-use vape sales hit 6 billion

pounds ($8 billion), around 70% of total vape industry sales,

last year.

"We should not be disadvantaged while illicit actors ...

take over the market," said a spokesperson for Marlboro-maker

Altria ( MO ), which has also shifted its stance on synthetic

nicotine products that lack an FDA licence.

U-TURN

BAT's new devices will initially go on sale in Tennessee,

Florida and Georgia, and while they do not yet have an FDA

licence, Pinto said they can be launched.

BAT acquired the device in April, but its previous owner

applied for an FDA licence in 2022. That application has been

pending long beyond the agency's 180-day mandate for reaching a

decision.

Reynolds launched a nicotine pouch brand last year on the

same basis. Pinto said it has never been challenged by the

agency over this move.

Altria ( MO ), which also previously considered synthetic nicotine

products without FDA signoff as illegal, has shifted to a

similar position, CEO William Gifford told investors in April.

"We're looking at all available opportunities to assess

what's the right move in that direction," he said.

The company's spokesperson said it regularly assesses the

market for opportunities.

It's a stark reversal for two of the industry's biggest

players.

Under FDA rules, since July 2022 synthetic nicotine products

have required the agency's authorisation.

Many companies, however, have simply ignored FDA rules, and

the regulator has struggled to stem sales of unauthorised

devices.

BAT's U.S. vape volumes have fallen by 33 million units -

around 10% - since 2022. Altria ( MO ) in January placed its 2028

growth targets under review, citing unauthorised sales by

smaller players.

Big tobacco companies initially fought back, launching

lobbying and marketing campaigns, lawsuits and intelligence

operations.

In 2023, Reynolds wrote to the FDA complaining that

unauthorised synthetic nicotine products were on the market

illegally and damaging legitimate businesses.

It also complained broadly about unauthorised disposable

vape sales using any form of nicotine by smaller U.S. and

Chinese players.

Pinto said, according to Reynolds' interpretation of the

FDA's public response to that letter, the agency was using

"enforcement discretion" for products with pending applications,

meaning they could be marketed legally.

WALKING THE LINE

Others disagree.

Brian King, executive vice president for U.S. tobacco

control programmes at the Campaign for Tobacco-Free Kids, said

BAT's strategy was illegal and dangerous.

"Flooding the market with unauthorised tobacco products -

including those with synthetic nicotine - presents a risk to

public health," said King, who until April was head of the FDA's

Center for Tobacco Products.

Jim McCarthy, spokesperson for trade body American Vapor

Manufacturers, which has defended businesses selling

unauthorised vapes amid Big Tobacco criticisms, meanwhile

criticised BAT's "breathtaking audacity" in introducing Vuse One

after advocating for action against competitors.

Anthony Sedgwick, co-founder of BAT investor Abax

Investments, backed the company's move, which he said could

boost revenues just as a Trump administration crackdown hits

unauthorised imports.

"BAT will walk absolutely on the line of where the

regulatory limit is," he said.

($1 = 0.7380 pounds)