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Reynolds American : FDA Warns Cigarette Makers on 'Natural' Labeling -- Update

08/27/2015 | 04:22pm US/Eastern
By Tripp Mickle 

The Food and Drug Administration on Thursday sent warning letters targeting the owners of top-10 cigarettes brands Winston and Natural American Spirit for violating federal law by marketing the brands as "additive-free" or "natural."

The agency said the warning is the first it has issued for use of those terms. It was sent to: Reynolds American Inc., owner of Natural American Spirit; Imperial Tobacco PLC, owner of Winston; and Sherman's 1400 Broadway N.Y.C. Ltd., owner of Nat Sherman cigarettes, for its Nat Sherman cigarette brand.

"The FDA's job is to ensure tobacco products are not marketed in a way that leads consumers to believe cigarettes with descriptors like 'additive-free' and 'natural' pose fewer health risks than other cigarettes, unless the claims have been scientifically supported," said Mitch Zeller, director of the FDA's Center for Tobacco Products, in a statement.

Reynolds said it is reviewing the FDA's letter. Nat Sherman declined to comment.

Imperial's U.S. subsidiary, ITG Brands LLC, said it believes its products comply with state and federal laws. In a statement, it said, "While we disagree with the FDA's position on this issue, we intend to engage with the FDA and respond to their letter in the coming days."

The FDA said that cigarette brands have to apply to become a "modified risk tobacco product" to be able to label or advertise as additive-free or natural. The agency hasn't approved any cigarettes as modified-risk products since it gained oversight of the tobacco industry in 2009.

The tobacco companies have 15 days to respond to the FDA and explain their plans regarding the labels. The FDA said failure to do so could result in further actions including monetary penalties, criminal prosecution or seizure.

The agency's action came in the same week that antitobacco activists and health groups wrote the FDA, urging it to take action against Natural American Spirit cigarette brand for advertisements with the phrases "additive-free natural tobacco" and "organic tobacco." The FDA said its action was part of a continuing investigation independent of the letter.

Natural American Spirit and Winston are both top-10 cigarette brands by sales in the U.S. Imperial acquired Winston in June from Reynolds as part of a $7.1 billion deal that included three other brands. ITG Brands is in the earliest phases of trying to reinvigorate Winston. It was the most popular cigarette in the U.S. in the 1970s but has fallen to No. 7, with an estimated 2.1% market share.

ITG Brands said in a statement that while it only owned Winston for 76 days, the brand has been marketed with its current packaging for more than 15 years in compliance with the Federal Trade Commission. It said, "The statement that FDA objected to currently appears only on the carton of Winston and not on the pack or advertising for the brand."

Natural American Spirit is priced higher than other cigarettes because some of its cigarette styles use organic tobacco and additive-free blends that include only tobacco and water. Other brands make use of additives such as glycerol and corn syrup to flavor the cigarettes.

The brand's sales have accelerated in recent years, rising to $658 million last year from $289 million in 2009. Reynolds said last month that Natural American Spirit's share of the U.S. cigarette market is now 1.8%.

The health and antitobacco groups said in their letter that the brand "is growing in popularity because consumers are being misled to believe that the brand offers a healthier alternative to other cigarettes." They added that disclaimers on Natural American Spirit advertising saying, "No additives in our tobacco does NOT mean a safer cigarette" are rendered "completely ineffective" because it is small in comparison to the type size of phrases such as "organic tobacco" and "100% additive-free."

More than two dozen groups signed the letter, including the Campaign for Tobacco-Free Kids, the American Heart Association, the American Lung Association and the American Legacy Foundation, which was formed in 1999 as part of the Master Settlement Agreement between tobacco companies and states.

The FDA's letter to Reynolds doesn't address Natural American Spirit's use of the word organic on some cigarette styles, but it could lead the company to curtail use of "additive-free" and "natural" in advertising.

Natural American Spirit's growth has coincided with an uptick in sales of products labeled organic. Sales of organic food more than tripled over the past decade to $39 billion last year, according to the Organic Trade Association, an industry group.

Write to Tripp Mickle at Tripp.Mickle@wsj.com

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