Cigarette makers' stocks plunge on news that US may curb nicotine

Menthol cigareetes are also facing a possible ban

The industry has been anticipating a decision about nicotine levels in cigarettes for years.

Tobacco stocks plunged following a report that the US government is considering a rule that would lower the nicotine content of cigarettes to a level that’s not addictive.

Marlboro producer Altria Group Inc lost almost $6bn in market value yesterday, while British American Tobacco Plc dropped as much as 6.6% in London this morning.

The Biden administration is mulling such a requirement, the Wall Street Journal reported, citing people familiar with the matter. The US Food and Drug Administration could also move to ban menthol cigarettes, according to the article. BAT is highly dependent on menthol brands such as Newport.

Imperial Brands Plc fell as much as 5% in London. Stock of 22nd Century Group, which already sells cigarettes with very low nicotine levels, jumped 11%.

The FDA declined to comment on the report on Monday.

The industry has been anticipating a decision about nicotine levels in cigarettes for years. The agency declared in 2018 that it intended to do so, prompting Altria had said it wasn’t clear whether that was technically achievable or would lead to reduced smoking. Since then, 22nd Century Group, based in Williamsville, New York, has come out with reduced-nicotine cigarettes.

Such regulations would have a “severe impact” on the tobacco industry, but will probably take years to implement, according to Adam Spielman, an analyst at Citigroup.

“Political reality requires there to be widespread availability of alternatives that are recognized to have lower risk,” he wrote. “Currently there are very very few such products.” In an email, Altria said any FDA action “must be based on science and evidence and must consider the real-world consequences of such actions, including the growth of an illicit market and the impact on hundreds of thousands of jobs.” 

The FDA has been expected to state its position on whether it would still allow menthol cigarettes by April 29, under a deadline imposed by a lawsuit. The case, brought by the African American Tobacco Control Leadership Council, had sued the government agency saying it had taken an unreasonably long time to respond to a citizen’s petition filed years ago that sought to prohibit menthol as a flavor in cigarettes.

Bloomberg