THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF REGULATION 11 OF THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS 2019/310.

3 August 2022

Chill Brands Group plc

("Chill Brands" or the "Company")

Update on Synthetic Nicotine Products

Chill Brands Group, the international consumer packaged goods company, provides an update regarding the status of its synthetic nicotine products.

Summary

·    US Regulators have introduced additional restrictions for synthetic nicotine products with substantial costs to manufacturers and retailers.

·    Chill Brands ends future development and US sales of its tobacco-free nicotine product line.

·    Company working with international partners to transfer remaining synthetic nicotine inventory for sale.

·    All other Chill Brands products remain unaffected.

Background                      

In December 2021, the Company launched a new range of 'tobacco-free nicotine' ("TFN") chew pouch products containing synthetic nicotine. These TFN products were marketed as an alternative to traditional tobacco-derived nicotine pouches. At the time of their launch, these synthetic nicotine products were not subject to the same regulations or restrictions as regular tobacco products and presented a compelling growth opportunity for the Company.

In March 2022, a federal funding bill that amended the statutory definition of "tobacco product" was passed by the US Congress. Amongst other changes, the bill gave the US Food and Drug Administration (FDA) authority over synthetic nicotine and brought the Company's TFN product line within the scope of tobacco regulations.

As a result of these changes to the US legal landscape, manufacturers of synthetic nicotine products must now submit Premarket Tobacco Applications (a "PMTA") for their products to legally remain on sale.

Status of Chill Brands' TFN Products

To date, Chill Brands has complied with all legal requirements in relation to the regulatory status of its TFN product line. The Company filed the requisite PMTA applications for each of its flavour and strength variants before the FDA deadline of 14 May 2022 and its TFN products have remained on sale without incurring any significant additional costs.

While the Company has already completed this initial regulatory stage at limited cost, the Board has identified that the full cost of pursuing a PMTA through to completion could exceed US$400,000 per product variant or flavour. In the event that full PMTA authorisation could be obtained, the Company would also face additional restrictions in respect of the marketing and online sale of its TFN products while being unable to use many major carriers to ship synthetic nicotine orders. Finally, the Company notes the FDA's stated intention to further restrict the sale of nicotine products.

In light of these factors, the Company has determined that it would not be commercially viable to continue with the development of its TFN product line or the PMTA submission process. Chill Brands' TFN synthetic nicotine products will therefore be withdrawn from sale in the US and development of that product range will cease with immediate effect.

The Company is making final arrangements to transfer its complete remaining inventory of TFN products to a number of international partners for sale in global markets where the same restrictions do not apply.       

These changes will have no effect on the Company's other products which remain on sale.

Callum Sommerton, Chief Executive Officer of Chill Brands, commented: "While synthetic nicotine initially presented itself as a promising growth category, recent developments have made it increasingly difficult and costly for challenger brands to remain on the market. With further regulatory changes expected, we have taken the difficult decision to call time on our TFN product range.

Naturally this is disappointing, but this decision will at least allow us to avoid expending further capital which will be better allocated to developing other products and potential revenue streams. As we mitigate the financial impact of these developments through the sale of our remaining synthetic nicotine inventory, we are now wholly focused on the success of our existing CBD range and the introduction of new complementary products that will be unveiled in due course."

-ENDS-

About Chill Brands Group

Chill Brands Group plc (LSE: CHLL, OTCQB: CHBRF) is an international company concerned with the development, production, and distribution of best-in-class hemp-derived CBD products, tobacco alternatives and other consumer packaged goods (CPG) products. The Company operates primarily in the US, where its products are distributed online and via some of the nation's most recognisable convenience retail outlets. The Group's strategy is anchored around lifestyle marketing that is designed to enhance the popularity of its products, channelling visitors to its landmark chill.com website.

Publication on website

A copy of this announcement is also available on the Group's website at http://www.chillbrandsgroup.com

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