By Saabira Chaudhuri
British American Tobacco PLC will challenge any restrictions on menthol cigarettes in the U.S. and plans to argue that a ban in Canada hasn't reduced smoking rates in its fight to convince regulators to allow it to keep selling the Newport brand.
The U.S. Food and Drug Administration is seeking a nationwide ban on menthols, part of a broader effort to curb teen smoking, a move that would remove nearly a third of the roughly 250 billion cigarettes sold each year in America.
Any ban would be a big blow to BAT, which spent about $50 billion to take full control of Reynolds American and push deeper into the U.S. market in 2017. BAT generates over 50% of its U.S. cigarette volumes from menthols.
Chief Executive Nicandro Durante said in an interview that BAT planned to fight any ban by saying there were no scientific studies showing that menthols cause more young people to smoke or a lead to a broader uptake of cigarettes.
He also said BAT would highlight research on the unintended consequences of banning menthol, such as rises in youth smoking and the experience of Canada, which banned menthols in 2017.
"In Canada, which banned menthol in 2017 the retention of consumers was 100%. People kept smoking," Mr. Durante said. "This is one of the examples I plan to use."
"They may come to the conclusion that it isn't to be banned," he said.
Health Canada, which has said menthols make tobacco smoke easier to inhale, facilitating youth smoking, didn't immediately respond to a request for comment.
The FDA concluded in 2013 that menthols are harder to quit and likely pose a greater health risk than regular cigarettes but has only talked about a potential ban in more recent years. The agency says menthol flavored cigarettes are likely associated with increased smoking initiation by youngsters, possibly because menthols help reduce throat irritation caused by cigarette smoke.
Studies show that menthols are typically popular among younger smokers and African-Americans.
Given the FDA's scientific approach to regulation, Mr. Durante said he expects the process of considering a ban, which includes a public consultation, could take between five and nine years.
If the FDA caps the level of menthol in cigarettes, Mr. Durante said, Newport would be at an advantage because it has the lowest level of menthol among similar-flavored cigarettes in the U.S.
The CEO's comments came as London-based BAT, which also sells the Kent, Dunhill and Lucky Strike brands, reported an 84% fall in full-year net profit to GBP6.03 billion ($8.01 billion). It blamed the sharp fall on currency headwinds and a prior-year gain from its acquisition of Reynolds.
Adjusted organic operating profit was up 4%, while revenue increased 25% to GBP24.49 billion.
BAT said it would take longer than previously telegraphed to hit a target of generating GBP5 billion in revenue from next-generation products. It said adoption of tobacco-heating products in Japan, like BAT's Glo and Philip Morris's IQOS, had cooled.
BAT said its Vuse e-cigarette brand had grown but lost share in the U.S. to Juul Lab Inc., the fast-growing e-cigarette maker that has recently attracted attention from regulators for appealing to youngsters.
Mr. Durante said the FDA needed to do more to crack down on access for youth vapers.
Adria Calatayud contributed to this article.
Write to Saabira Chaudhuri at email@example.com