California e-liquid manufacturer Cosmic Fog has sold a share of its business to Fontem Ventures, a Netherlands-based subsidiary of Imperial Brands (formerly Imperial Tobacco Group).
According to a Fontem press release, the company bought “an equity share,” but offered no details on how large a percentage of Cosmic Fog it now owns.
Cosmic Fog was founded in 2013, and is one of the oldest and largest premium e-liquid manufacturers in the country. Cosmic Fog also sells products in 60 countries around the world, including in all 28 European Union member states. The company is based in Costa Mesa, CA.
“Becoming a partner in Cosmic Fog demonstrates that we love their passion and entrepreneurship,” said Fontem CEO Titus Wouda Kuipers. “We see a great opportunity to learn from their expertise, particularly in the vape shop sales channel. Cosmic Fog will continue to do what it does best – develop unique, high quality liquids with huge appeal to adult vapers.”
Cosmic Fog co-founder Brant Peto said “Our partnership with Fontem allows us to leverage its experience in e-vapour, including in regulatory compliance, ensuring that our customers enjoy continued access to our products as international e-vapour markets mature.”
“E-vapour” (or e-vapor) is a tobacco industry term for vaping.
There is no word whether the investment by Fontem will affect Cosmic Fog’s plan to file a premarket tobacco application for some of its e-liquids. The company had announced last summer that it intended to file a PMTA in September 2018.
With the FDA about to issue its notice of rulemaking for e-liquid flavors — and the serious restrictions that will likely result — it’s hard to see a profitable future in the U.S. for open-systems e-liquid manufacturers. But Cosmic Fog is also sold throughout the EU, which is Fontem’s home.
Who else has made a deal with Big Tobacco?
Since the Deeming Rule was announced by the FDA in 2016, all of the major cigarette companies have made investments in — or outright purchases of — independent vaping businesses.
Before the Cosmic Fog investment, Fontem and its e-cigarette company blu purchased the My. Von Erl pod vape from its Austrian owners, and rebranded it as the myblu. That product has just been released in the U.S. and U.K. Before it was bought by Fontem, Von Erl had signed a distribution deal last summer with the Imperial subsidiary.
Altria Group, the parent company of Philip Morris USA — makers of Marlboro cigarettes — has made several forays into the vapor market. In addition to buying a stake in vape shop chain Avail Vapor, the tobacco giant bought pod vape Cync.
British American Tobacco (BAT), which has been active selling vaping products in the U.K., recently bought American tobacco company Reynolds American (best known as RJ Reynolds). The BAT vapor portfolio isn’t being sold the the U.S. yet, but presumably we’ll see Reynolds-branded vapes soon — aside from its declining gas station cigalike Vuse, that is. And late last year, BAT purchased South African indie vape leader Twisp.
The cigarette companies smell the change in the air, and want to remain relevant. If they have to buy the entire vapor industry to do it, they could — easily. Altria, for example, had nearly $15 billion in profits alone last year. That’s three times the total sales of all American vape businesses combined.
Since no vapor products not on the market as of August 8, 2016 can be sold without going through the annoying-to-impossible (annoying to Big Tobacco — but impossible for vape companies) PMTA process, cigarette manufacturers may be saving themselves some money by buying up existing brands.
Whether they’ll bother to take a chance on submitting PMTA’s for any of these new purchases is anyone’s guess. What they’re really waiting for is the FDA’s response to the Philip Morris International (PMI) PMTA and modified risk applications for its IQOS heat-not-burn device. The result of those submissions will probably determine the future of low-risk nicotine products in the U.S.