Swedish Hopes Rise on Snus Ban

Source from:  The Wall Street Journal  10/22/2012

Sweden is stepping up its efforts to lift the European Union's ban on snus tobacco—potentially opening up a $2.3 billion market—after an antifraud report last week prompted the resignation of a key public opponent to legalizing snus sales.

Swedish officials and the country's multibillion-dollar snus industry have long argued that snus—a moist powdered tobacco sold as small mesh pouches packed into round containers the size of a hockey puck—offers a safer alternative than other forms of tobacco.

The EU, however, has so far opposed any relaxation of the ban on sales in most of the 27-country bloc. The ban went into effect in 1992 amid concerns over oral cancer and other health problems. Sweden is exempt from the rule, having joined the bloc in 1995 with the understanding that the sale of snus—an estimated 285 million cans are consumed annually in Sweden and Norway—wouldn't be subject to EU regulation.

Swedish Trade Minister Ewa Bj?rling said in an interview that she hoped the investigation by the EU's antifraud office, Office de Lutte Anti-Fraude, or OLAF, into a complaint made in May by tobacco producer Swedish Match AB, would lead to more transparency in the development of the new tobacco products directive. The directive was due at the end of this year but is now likely to be delayed following the resignation of Health Commissioner John Dalli.

"I hope the EU Commission themselves now see that all cards must come up on the table and all facts need to be discussed openly," she said. Ms. Bj?rling argued that the Commission has so far ignored scientific research indicating that the stuff is less harmful than cigarettes and other forms of smokefree tobacco.

The stakes for Sweden are huge. The ban has cost the Nordic country at least 3 billion Swedish kronor ($455.7 million) per year in lost export revenue, according to the Swedish Retail Institute, which estimates the total market potential to be between 13 billion and 15 billion kronor within 10 years of lifting the ban. That assumes consumption by four million Europeans of 900-1,000 million cans of snus per year, with an outgoing price from the manufacturer of 15 kronor per can. According to the retail institute, Swedish manufacturers could realistically hope to grab a 20% slice of the total cake, in line with their market share in the U.S., the world's biggest market for smokeless tobacco.

Mr. Dalli resigned Tuesday amid allegations that he had been aware of contacts made by Maltese businessman Silvio Zammit to gain money from Swedish Match in exchange for seeking to influence the commission's future legislative proposal on tobacco products, in particular the EU export ban on snus Swedish Match Friday alleged the amount offered was €60 million ($78.1 million).

Mr. Dalli refuted the charges against him in an online video interview with the publication New Europe and said in a statement to the Times of Malta newspaper that he was subject to "a systemic plan of entrapment." Mr. Zammit in an email also denied all "allegations of any wrongdoing on my part." He said it was tobacco industry officials "that set the ball rolling" on their contacts.

Swedish Match spokeswoman Rupini Bergstr?m said the company "categorically denies" trying to entrap Mr. Dalli and has no interest in any kind of delay or disruption of the tobacco directive process.

"We have been waiting for this eagerly for 12 years now and we would like that directive to go forward as planned," she said. "We would hope, under the circumstances, that it will now ensure there is a fair and due process for snus, because snus has never been assessed on its own merit. It has always been lumped together with other types of tobacco," Ms. Bergstr?m said.

Bank of America Merrill Lynch said in a research note that the resignation of Mr. Dalli could be "very good" news for Swedish Match, which could expect higher growth prospects and potential takeover speculation should the ban be lifted.

"The next health commissioner will have to firmly justify any decision on the EU snus ban," Bank of America Merrill Lynch said. "Given significant scientific evidence showing snus to be significantly less harmful than cigarettes, we believe this increases the probability of the EU snus ban being lifted," the bank added.

Ms. Bj?rling said she found it "highly remarkable" that Mr. Dalli was indirectly linked to the bribery allegations, given his often publicly stated opposition to opening up European snus exports for health reasons.

Ms. Bj?rling said the case had shone the spotlight on the EU's "bullying of snus" and raised awareness about the Swedish push for uniform regulation on oral tobacco. "There are other forms of oral tobacco sold within the EU but the Swedish snus is banned, even though we know it's less harmful," she said. She cited a 2008 report from the Scientific Committee on Emerging and Newly Identified Health Risks, or SCENIHR, which stated that the evidence for oral cancer in users of Swedish snus is less clear and that the Swedish data don't support the hypothesis that snus is a gateway to future smoking.

The health community remains divided on how dangerous snus is. Some argue it's the safest of all tobacco products and can help steer people away from smoking, while others say it could cause anything from pancreas cancer to hypertension.

"Snus may be less harmful, but it's not harmless," Frederic Vincent, EU commissioner spokesman for health and consumer policy, said in an email, adding that the EU commission has taken into account "all the necessary studies, including on snus" in preparing the new tobacco directive.

Whether the resignation will actually impact the legislative process remains to be seen. Mr. Dalli said in the interview with New Europe that the tobacco industry stood to gain from his resignation as it would likely delay the commission's proposal. EU Commission spokeswoman Pia Ahrenkilde Hansen said Brussels would press ahead with its work on the new tobacco rules as soon as a replacement health commissioner is in place. Ms. Ahrenkilde Hansen said she hoped this could happen "swiftly." Malta's government must nominate a replacement, who will be responsible for submitting the commission's proposal for changes in tobacco regulations.  Enditem