Tobacco shares plunge as Biden mulls cutting nicotine levels in cigarettes

'Wall Street Journal' has reported US government may only allow cigarettes with nicotine levels so low they would no longer be addictive

The US Food and Drug Administration could also move to ban menthol cigarettes. Picture: Eva Hambach/AFP via Getty Images

Shares in tobacco firms plunged after the Wall Street Journal reported the US government may only allow cigarettes with nicotine levels so low they would no longer be addictive.

The US Food and Drug Administration could also move to ban menthol cigarettes as the Biden administration considers imposing requirements to lower nicotine content, the newspaper said, citing sources. 

Marlboro producer Altria lost almost $6bn (€4.98bn) in market value, while British American Tobacco dropped as much as 7.3% in London trade as analysts estimated the maker of Lucky Strike cigarettes gets a quarter to a third of its earnings from menthol brands such as Newport.

Imperial Brands, whose brands include Kool and American Spirit, fell as much as 7.3%. 

Stock of 22nd Century Group, which already sells cigarettes with very low nicotine levels, had jumped 11% earlier in the week. 

The FDA declined to comment on the report. The Wall Street Journalsaid the Biden administration is weighing to enact a menthol ban or nicotine restrictions, or both.

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 to say it is not clear whether that is technically achievable or would lead to reduced smoking. 

Since then, 22nd Century Group, based in 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 recognised to have lower risk,” he wrote. “Currently there are very very few such products,” the analyst said.

The notion of a US federal mandate to cut nicotine levels in US cigarettes would impair Altria most, considering it controls 53% of the $90bn US market, though such a requirement would be years away and face fierce legal challenges.

Kenneth Shea, a Bloomberg analyst 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”.

BAT’s Reynolds unit said there are better ways to improve public health and reducing the harm tobacco brings. 

“Many consumers wrongly believe that a cigarette very low in nicotine content is lower in risk than traditional cigarettes, a misconception that poses a major hurdle in determining proposed rulemaking for low nicotine cigarettes,” the company said.

One issue is that such a rule might lead some smokers to consume more cigarettes as they seek a fix to their nicotine cravings, inhaling more dangerous chemicals in the process. It could also create a black market for more powerful cigarettes.

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 flavour in cigarettes.