San Francisco’s first-in-the-nation ban on e-cigarette sales, scheduled to take effect this week, is weighing heavily on Asad Sharifi, who owns Cheaper Cigarettes in the city’s Sunset District.
Sharifi worries he may have to close his business, which sells cigarettes, cigars, pipes and vapes, because it’s poised to lose 40% of its profits.
“I don’t know what the hell I’m going to do,” said Sharifi, who estimates he’ll lose $12,000 this year from vaping items he won’t be able to sell. “I doubt I’d be able to pay rent out here.”
Similar misgivings have been brewing among the 700-plus tobacco retailers in San Francisco — many of them family-owned and immigrant-owned corner stores, smoke shops and vape shops — since city officials passed an ordinance in June prohibiting the sale of many nicotine vaping products, specifically those that have not been cleared by a Food and Drug Administration review required under federal law.
The city ordinance, which does not bar the sale of cannabis vaping products, takes effect Wednesday. The law is meant to prevent minors, who are vaping in record numbers, from obtaining the products. Besides imposing restrictions on shops, it also bars e-cigarettes bought online from being shipped to San Francisco addresses.
Tobacco sellers are taking various tacks to try to adapt. Some have pivoted to selling products containing the cannabis compound CBD only, while others are adding apparel and herbal supplements to their shelves to try to make up for lost revenue. Sharifi, for example, tried adding shirts and jerseys at Cheaper Cigarettes but said they don’t sell well. Stores can continue to sell regular cigarettes, but their owners say vapes have been more profitable because they can be bought for less from wholesalers and marked up more.
Customers, meanwhile, are heading to cities in the East Bay and Peninsula that have fewer regulations on vape sales. They are split on the city’s new restrictions.
“I find it annoying,” said Lee Rothschild, an engineer who works in the city’s Mission District and has been buying e-juice down the street at Smoke Time for the last seven years, on his way home to the East Bay. “It’s an annoyance for people who want or need it. Now no one carries anything anymore. They only have CBD or zero nicotine. I end up ordering it elsewhere or go to shops in Walnut Creek.”
Rothschild began vaping a few years ago to try to quit cigarettes and now considers himself a hobbyist. He prefers fruity flavors like cantaloupe.
San Francisco’s vape ban
“It’s not the city’s job to prevent kids from getting these things,” he said. “There’s so much public transit in and out of the city, banning it within the 7-by-7-mile city is a minor inconvenience at best. … Kids, if they want to get it, they can just take BART.”
Michael Villanueva, who works in San Francisco and lives in Daly City, supports the ban, even though he himself vapes, usually using products from market leader Juul, which is headquartered in San Francisco. Vaping helped him quit cigarettes, he said, but he hopes to quit vaping one day, too.
“It makes me kind of mad I can’t buy it while at work. That’s why I buy it in Daly City,” Villanueva said. “I know vaping isn’t good for you. That’s the main reason I support the ban. Vaping is helping me, but I know it’s still not good for me. … Maybe (the ban will) push me not to buy it.”
The vast majority of vaping products on the market fall under San Francisco’s ban, since almost none have cleared an FDA review, which evaluates whether a product is “appropriate for the protection of public health.” So far, the Philip Morris electronic smoking device IQOS, which completed the review in 2019, is the only e-cigarette that can be sold in the city after Jan. 29. The main differences between IQOS and vaping is that IQOS heats tobacco, rather than liquid nicotine, to a vapor, and does not come in sweet and fruity flavors.
The San Francisco Office of Small Business estimates the e-cigarette ban will amount to $70 million in lost sales annually, but that does not account for spending on other products that might replace e-cigarettes. San Francisco Chief Economist Ted Egan said he does not anticipate a material impact to the city’s economy because any money that would have been spent on vaping products will be spent in the city on other goods. His office, which analyzed the ban legislation before it passed last year, plans to complete an updated economic impact analysis in the next two months, Egan said.
It is unclear how much in tax revenue may be lost a result. Tobacco taxes, including e-cigarette taxes, are collected by the state. In fiscal year 2018, according to the California Department of Tax Free Administration, the state collected $211.4 million in tax revenue from e-cigarettes, chewing tobacco, snuff and “other tobacco products” — which does not include traditional cigarettes. But the state does not break out what portion of that comes from e-cigarettes specifically. By comparison, the state collected nearly $1.9 billion in cigarette tax revenue in fiscal year 2018.
City officials, led by Supervisor Shamann Walton — who co-authored the vaping legislation with City Attorney Dennis Herrera — have convened an “economic mitigation working group” to help tobacco retailers deal with the new ban and other restrictions on tobacco sales the city has enacted the last five years — including a ban on the sale of flavored tobacco (namely flavored vapes and menthol cigarettes) which passed in 2018 and took a toll on many stores’ vape sales.
The group is discussing whether the city could increase resources to help tobacco retailers diversify their inventory or expand Healthy Retail SF, which offers incentives to stores to sell healthier alternatives. Smoke shops are also pushing for a reduction in a fee, currently $1 per pack of cigarettes, that tobacco retailers must pay the city each quarter to clean up cigarette litter.
“We are working with small businesses to mitigate impacts,” Walton said. “I will restate that the health of our children is more important than profits.”
Tobacco retailers, who are currently in the process of throwing out their remaining e-cigarette inventory or selling it to shops outside the city, say they’ve been hurt by San Francisco’s increasingly strict tobacco restrictions the last few years. Still, many previously benefited from a 2008 ordinance that banned the sale of tobacco in pharmacies — which gave smoke shops and corner stores a monopoly on the tobacco market in San Francisco.
A spokesman for Herrera said retailers have had ample time to sell inventory and adjust their business model. He cited support of the policy from San Francisco voters, who decisively rejected an attempt initially backed by Juul to overturn the ban through a ballot measure in last November’s election.
In San Francisco, just 14% of high school students who vape buy their e-cigarettes in a store. The vast majority, 86%, get them from friends, the Internet or other means, according to statistics cited in the city’s vaping legislation. In 2019, 7% of tobacco retailers sold to a minor during decoy operations, according to the city’s Department of Public Health, which enforces tobacco laws. It has two senior health inspectors and three health program trainees devoted to enforcing the new ordinance.
Smoke Time, a family-owned smoke shop that’s been in the city’s Mission District since 2009, estimates that 20% of its annual $500,000 revenue comes from vapes. To help offset the projected losses, the store is expanding its apparel offerings and adding more varieties of the herbal supplement kratom, which is believed to help ease pain and anxiety.
“Three years ago, we sold maybe two shirts. Now half the store is clothes,” said Ahmad Ibrahim, who works at the store, owned by his father Mohammad.
The Ibrahims are not so much worried about the lost sales, which they believe they can replace by selling other items, as they are frustrated that the city is, in their view, unfairly picking and choosing which products to restrict. If it’s going to prohibit vapes, it should also ban tobacco and alcohol, they said.
“They say flavors are attracting kids, but isn’t that the same case with alcohol?” Ahmad said. Referencing a type of apple-flavored vodka, he added: “It’s maybe more harmful than vapes.”
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