CBD-Derived Products May Provide Consumers an Alternative to Tobacco

NEW YORK, July 6, 2020 /PRNewswire/ -- Earlier last year, New York State voted to decriminalize the recreational use of cannabis. Instead of jail time, offenders are now punished with a fine. And while cannabis is only legal for medicinal purposes in the state of New York, many companies have already established operations in anticipation of recreational legalization. In New York City, there are already over a dozen legal medical dispensaries. Overall, the legal cannabis market is permeating throughout the U.S. and is creating a multi-billion-dollar industry. Medical cannabis can already be found in many regions around the world such as parts of the U.S., Australia, Canada, France, Germany, Thailand, and South Korea. Predominantly, the overall CBD market is driven by the medical sector. And, while medical cannabis still dominates that broad cannabis marketplace, increasing awareness and legalization efforts are expected to further propel the industry forward. As a result, the global legal cannabis market is expected to reach USD 146.4 Billion by 2025 while registering a CAGR of 34.6%, according to data compiled by Grand View Research. TAAT Lifestyle & Wellness Ltd. (CSE: TAAT), Altria Group, Inc. (NYSE: MO), British American Tobacco (NYSE: BTI), Philip Morris International Inc. (NYSE: PM), Vector Group Ltd. (NYSE: VGR)

The use of CBD can and often does converge with other industries. For example, hemp citrates converge with the tobacco industry, which may inadvertently cause positive effects across the board. According to the former FDA Commissioner Scott Gottlieb, M.D., Tobacco use also costs nearly USD 300 Billion a year in direct health care and lost productivity. In fact, cigarettes are the only legal consumer product that, when used as intended, will kill half of all long-term users. Overall, 480,000 Americans die every year from tobacco use, mainly from smoking cigarettes, according to FDA's data from 2018. In the meantime, some data estimates that CBD may potentially reduce cigarette consumption among tobacco smokers. Researchers at University College London, conducted a small study in 2013 of 24 smokers and gave them an inhaler with CBD or placebo for one week. The results of the study showed that, "Over the treatment week, placebo treated smokers showed no differences in number of cigarettes smoked. In contrast, those treated with CBD significantly reduced the number of cigarettes smoked by ~40% during treatment." 

TAAT Lifestyle & Wellness Ltd. (CSE: TAAT) announced earlier last week breaking news that it, "has identified a significant opportunity to compete in the menthol cigarettes category of the global tobacco market with its menthol variety of Taat Beyond Tobacco™ cigarettes. At a global level, the menthol cigarette category was valued by Grand View Research at USD $80 billion in 2018, with a predicted compounded annual growth rate of 3.1% between 2019 and 2025. Despite this projected growth, the Company believes that there is significant unmet demand which can potentially continue to be unmet as several government bodies worldwide have banned or have sought to ban menthol cigarettes, which began with a nationwide ban being passed in Brazil in 2012, with Canada following closely thereafter finalizing a federal ban on menthol cigarettes in October 2017. Characterized by a unique cooling sensation from menthol (a substance derived from plants such as peppermint and spearmint), menthol cigarettes are believed by many smokers to be less harmful than traditional tobacco cigarettes, although according to the U.S. National Cancer Institute there is no evidence to substantiate this notion.

The Company has developed Taat Beyond Tobacco™ cigarettes as a better-for-you alternative to traditional cigarettes in an "Original" tobacco flavour, as well as a "Menthol" version, neither of which contain nicotine or tobacco. The user experience of Taat Beyond Tobacco™ cigarettes is designed to replicate that of a traditional cigarette between the "stick" format, cigarette-style packaging, a proprietary flavouring blend, and an enhanced volume of smoke exhaled. Taat Beyond Tobacco™ cigarettes each contain a minimum of 50mg of cannabidiol ("CBD", a non-psychoactive derivative of hemp), which has been shown to mitigate tobacco withdrawals and reduce dependency. Initial retail market testing of Taat Beyond Tobacco™ cigarettes, as detailed in the Company's June 29, 2020 press release, yielded overwhelmingly positive responses from users, whose anecdotes formed a general consensus that there were no significant experiential differences between Taat Beyond Tobacco™ cigarettes and legacy tobacco products.

Menthol, which is also commonly used in non-tobacco products such as lozenges, ointments, and candy, was first added to cigarettes in the 1920s. The tobacco industry presented menthol cigarettes as a supposedly healthier alternative to regular cigarettes, which was part of a strategy to target beginner smokers who had health concerns regarding smoking. Kools, the first major brand of menthol cigarettes, was founded in 1933 and gained a 2.2% market share by 1935 with the purported benefit of "throat comfort". Beginning in the mid-1950s, tobacco producers also began offering menthol cigarettes under standalone brands, including R.J. Reynolds (Salem), Lorillard (Newport, Spring), and Philip Morris (Alpine).

Following several decades of popularity for menthol cigarettes, in 2012 the World Health Organization published guidelines recommending regulation of ingredients that seek to make tobacco smoking more attractive, to include the use of flavours such as menthol. To date, nationwide bans have been passed in Brazil and Canada, as well as across the European Union. In February 2020, the United States House of Representatives approved a bill on a 213-195 vote which would include banning cigarette flavouring such as menthol.

The Company believes that several current factors create an environment in which the menthol variety of Taat Beyond Tobacco™ cigarettes can potentially thrive. Foremost, there is a sustained demand for menthol cigarettes in jurisdictions in which they remain legal. As of 2018, menthol cigarettes represented 36% of all cigarettes sold in the United States, the highest ever proportion since reporting of such data by major tobacco companies was required. A 2010 estimate by Philip Morris also showed that menthol cigarettes had a 49.4% market share in the Philippines10. Additionally, as of this writing there are no known competitor products that offer a cigarette-like smoking experience that specifically imitates menthol cigarettes. Between potentially being market-ready in just a matter of months and the combination of demand for and regulatory action against menthol cigarettes, TAAT LTD is confident in the early-stage and long-term prospects for Taat Beyond Tobacco™ cigarettes.

A chart accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/7200bba6-8493-4269-a54c-51140ed7b8e5

Chart adapted from The influence of the availability of menthol cigarettes on youth smoking prevalence (Oxford Economics, December 2012)

TAAT LTD Founder Joe Deighan commented, 'In recent years, many of the most successful innovation strategies have sought to identify unmet niche demand, as opposed to simply aligning with existing demand that is already being met. Like many other players in the tobacco space, we are abundantly aware of the mass-market demand for better-for-you alternatives to traditional cigarettes. The difference between traditional cigarettes and menthol cigarettes is that there is no existing threat to the legality of the former, whereas the latter has been banned in multiple jurisdictions, with others potentially on the horizon too. As a result, millions of menthol cigarette users are or may soon be without a choice but to stop smoking menthols. Because Taat Beyond Tobacco™ cigarettes are designed to mimic the experience of smoking a traditional cigarette, we believe that promoting the product in its menthol variety can appeal to menthol converts who may be unsatisfied by other alternatives. We plan to announce further details regarding our targeted strategy for the menthol variety of Taat Beyond Tobacco™ cigarettes as we approach our scheduled launch in Q4 2020.'"

For our latest "Buzz on the Street" Show featuring TAAT Lifestyle & Wellness Ltd. recent corporate news, please head over to: https://www.youtube.com/watch?v=SaR2tdXObEI  

Altria Group, Inc. (NYSE: MO) announced that the Food and Drug Administration (FDA) has accepted and filed for substantive review premarket tobacco product applications for 35 on!® products manufactured by Helix Innovations LLC, an Altria joint venture responsible for the global on!® nicotine pouch product portfolio.

To support these applications, Altria submitted over 66,000 pages of documentation, including six primary studies. "We believe the scientific evidence in these applications demonstrates that the marketing of on!® is appropriate for the protection of public health," said Paige Magness, Senior Vice President, Regulatory Affairs for Altria Client Services. "on!® nicotine pouches are a key part of our vision to responsibly lead the transition of adult smokers to a non-combustible future."

British American Tobacco (NYSE: BTI) announced last November that it is creating three global brands for its New Category product portfolio: VUSE for vapour products; VELO for modern oral products and glo for tobacco heating products to further accelerate the growth of their New Category business.  BAT has long been focused on offering adult consumers a range of satisfying and enjoyable products with reduced-risk potential in comparison to cigarettes. Since launching its first e-cigarette in the UK in 2013, BAT has made impressive progress, now offering an unrivaled range of innovative and exciting products in more than 40 countries around the world.

Philip Morris International Inc. (NYSE: PM) announced earlier in January, a global collaboration agreement with the leading tobacco and nicotine company in South Korea, KT&G, to commercialize KT&G's smoke-free products outside of the country.  "Our objective is that all adult smokers who would otherwise continue to smoke switch as soon as possible to better alternatives and abandon cigarettes to the benefit of their health, public health and society at large. Further to our ongoing efforts to develop, assess, and commercialize our pipeline of science-based smoke-free alternatives to cigarettes, we are always open to collaboration with third parties on products that complement our already strong portfolio and that we can further enhance. We are delighted that KT&G has chosen PMI to expand the sales of its smoke-free products outside of South Korea…"

Vector Group Ltd. (NYSE: VGR) is a holding company for Liggett Group LLC, Vector Tobacco Inc., New Valley LLC, and Douglas Elliman Realty, LLC. Earlier in May the Company announced financial results for the three months ended March 31st, 2020. First quarter 2020 revenues were USD 454.5 Million, compared to revenues of USD 420.9 Million for the first quarter of 2019. The Company recorded operating income of USD 53.3 Million for the first quarter of 2020, compared to operating income of USD 42.6 Million for the first quarter of 2019. Tobacco Adjusted Operating Income (as described in Table 5 attached hereto) for the first quarter of 2020 was USD 69.2 Million, compared to USD 60.1 Million for the for the first quarter of 2019.

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