GLOBAL E-CIGARETTE INDUSTRY WEEKLY REPORT (4.17-4.23)

GLOBLE MARKET:

Global

【1】The global e-cigarette user base has grown by nearly 20% in 2021, reaching a total of 82 million users. Among them, the Eastern Mediterranean region has 92 million users, Africa has 56 million users, Europe has 201 million users, the Americas have 168 million users, the Western Pacific region has 160 million users, and Southeast Asia has 143 million users.

Europe

【1】On April 13th, according to betterretailing news, the well-known retail distributor Booker in the UK issued a recall notice for certain products of disposable e-cigarette brands SKE Crystal and IVG, citing “manufacturing quality issues”.

【2】On April 13th, in an interview with two top e-cigarette manufacturers in Russia regarding the “ban on flavor additives in Russia” incident, the founder of a nicotine production company, Andrei Chervov, believed that the Russian government will continue to strengthen regulations and the regulatory trend for e-cigarettes is irreversible.

【3】On April 16th, according to The Guardian in the UK, a laboratory analysis conducted by Inter scientific on 52 e-cigarette products found that 73% of e-cigarette oils exceeded the legal level of 2ml, and over 40% of e-cigarettes were filled with more than 5ml of oil; some e-cigarettes that claimed to be nicotine-free actually contained nicotine at the same level.

【4】On April 17th, regarding the “ban on e-cigarette additive”, two top e-cigarette news centers interviewed Yuri Babinkov, the Tobacco Department Manager of “Honest Label” operating company, who stated that “Honest Label” has not made any changes and e-cigarettes are still subject to mandatory labeling.

【5】On April 18th, regarding the issue of “73% of e-cigarettes in the UK exceeding the capacity limit”, two top e-cigarettes learned from the testing agency Inter scientific that the UK Trading Standards Institute is hiring third-party laboratories to test illegal e-cigarettes in the market, and all products tested this time did not appear on the list of legal products published by MHRA.

【6】On April 18th, in interviews with multiple sources, it was revealed that the logistics and customs clearance regulations in the Russian market have become stricter; some distributors only accept white customs clearance products; some companies are considering “grey to white” transition, but most companies are still observing the situation.

【7】 On April 19th, the UK Vaping Industry Association (UKVIA) made a statement regarding the recent disclosure of e-cigarette oil exceeding the limit by independent laboratories, stating that they will not tolerate e-cigarette companies filling e-cigarette oil beyond regulatory limits, and have submitted a plan to parliament to strengthen the regulation of illegal sales.

【8】On April 20th, two top e-cigarettes conducted an in-depth analysis of various data in the European market and found that fruit flavors dominate the e-cigarette market in Europe, with single fruit flavors accounting for over 70% of the market share, with strawberry and watermelon being the most popular flavors.

【9】On April 20th, regarding the issue of “independent laboratory revealing e-cigarette e-liquid exceeding standards”, Two Above interviewed the Independent British Vape Trade Association (IBVTA) and learned that the association has been advocating for stricter regulation of e-cigarette products and is committed to ensuring that e-liquid is not filled beyond the regulatory limits. They also stated that they are cooperating with relevant authorities and testing agencies to address the issue of illegal sales and non-compliant products.

【10】On April 23rd, according to a report by Euromonitor International, the global e-cigarette market is expected to reach $55 billion by 2025, with Europe and North America being the two largest markets. The report also highlighted the increasing demand for e-cigarettes among young adults and the growing popularity of pod systems and disposable e-cigarettes.

VAPE REGULATION:

North America

【1】The city council of Flushing, Michigan, United States, has passed a law prohibiting the purchase and use of e-cigarettes by minors, effective April 30th. Anyone under the age of 21 who purchases, carries, or uses e-cigarettes in Flushing will face fines, and selling e-cigarettes to minors will result in misdemeanor charges.

【2】On April 18th, James Comer, Chairman of the United States Congressional Committee, announced an investigation into the FDA and requested the agency to submit documents related to its decision not to regulate CBD products.

【3】On April 20th, the government of Quebec, Canada, proposed amendments to the current Tobacco Control Act to ban the sale or distribution of flavored e-cigarettes, except for tobacco-flavored ones. Imperial Tobacco expressed disappointment with this decision and considered the flavor restrictions on e-cigarettes to be misleading.

【4】On April 17th, the Attorney General of Minnesota, United States, announced a settlement agreement with e-cigarette manufacturer Juul and Altria, although the settlement amount has not been disclosed. Previously, the state of Minnesota accused these two companies of advertising to minors, violating state law.

【5】On April 22nd, recreational marijuana was officially legalized in the Northeastern state of Delaware, United States. It is reported that Governor John Carney vetoed the recreational marijuana legalization bill last year and still holds opposing views this year, but does not want to further drain the government’s resources.

Europe

【1】Valentina Matviyenko, Chairwoman of the Russian State Duma, announced that the government is ready to amend the Russian Criminal Code to increase the penalties for illegal sales of e-cigarettes, in order to punish those who violate the law. The State Duma will also amend the relevant tax laws to curb the consumption of e-cigarettes.

【2】On April 12th, according to the Russian Parliament Newspaper, the Russian government proposed that the production, storage, and supply of cigarettes, tobacco, and nicotine-containing e-cigarette products all require national licenses. This proposal has been passed in the first reading by the State Duma.

【3】On April 14th, Spain will introduce a new Royal Decree to regulate the manufacturing, display, and marketing of tobacco and related products. Currently, the decree is in the public consultation stage.

【4】Recently, the Netherlands Food and Consumer Product Safety Authority (NVWA) reported that two-thirds of the businesses they inspected did not require buyers to provide identification, and sold tobacco products and e-cigarettes to minors. NVWA stated in the announcement that they will continue to strengthen law enforcement inspections to ensure that market shops comply with age restrictions.

【5】On April 15th, lawmakers in St. Petersburg, Russia drafted a bill proposing a ban on the sale of nicotine-containing products to people born after January 1, 2011, as well as prohibiting them from purchasing and consuming such products. The St. Petersburg City Council has accepted the draft for consideration, and if approved, the document will be sent to the State Duma for discussion.

【6】According to the Baltic Times, Estonia’s new government cabinet plans to raise taxes on alcohol and tobacco consumption, although the specific increase has not been announced. However, a spokesperson for the Social Democratic Party said that there is consensus within the ruling coalition, and Estonia’s incoming finance minister indicated they will continue to tax behaviors “affecting health.”

【7】On April 18th, British Prime Minister Rishi Sunak criticized e-cigarette companies in an interview for overly targeting children with their advertising and stated that the government is already taking action against illegal e-cigarette sales, ensuring all regulations are enforced.

【8】On April 18th, foreign media Market Watch reported that Italy’s competition regulator (AGCM) launched an investigation into British American Tobacco (BAT) and Amazon, accusing the two companies of providing misleading information in advertising the new heated tobacco device glo hyper X2, falsely implying that the product does not contain nicotine.

【9】On April 17th, the Staffordshire County Council in the UK published an article on their official website summarizing the results of actions against illegal tobacco and e-cigarette sales in March. Enforcement officers seized £24,000 worth of illegal items during the series of operations.

【10】On April 18th, EU Ombudsman Emily O’Reilly preliminarily determined that the European Commission had failed to handle meetings with the tobacco industry in a fully transparent manner, constituting mismanagement, and requested a response within three months.

【11】On April 20th, Russian customs officers in Nizhny Novgorod seized a batch of imported tobacco products without “honest labels,” with the products valued at 50 million rubles (about 4.22 million RMB). A total of 74,000 individual packages were seized, including e-cigarette oils, tobacco products, and hookah mixtures.

【12】Recently, British MP Caroline Johnson called on the government to strengthen the promotion regulation on social networking platforms to prevent minors from being exposed to e-cigarettes. The UK government is currently collecting evidence to understand how to address the issue of youth e-cigarette use.

【13】On April 20th, a roundtable discussion on “The Problem of Illicit Tobacco Product Trafficking in the Orenburg Region: Dynamics, Growth Risks, Countermeasures” was held in Orenburg, Russia. Top executives from Philip Morris International (PMI), British American Tobacco (BAT), and Japan Tobacco International (JTI) participated in the discussion.

【14】Recently, according to the Russian Federal Regulations Information Disclosure website, the authority to regulate the tobacco and tobacco product market may be transferred from the Ministry of Agriculture and the Federal Tax Service to the Ministry of Finance. After the transfer, the Ministry of Finance will have the authority to formulate policies related to tobacco and nicotine-containing products and supervise them.

【15】According to Dutch media nu.nl, on April 21st, the Dutch government decided to ban the sale and promotion of nicotine pouches. The ban is currently awaiting review by the Dutch Parliament.

【16】On April 20th, a new tobacco product regulation bill was registered in the Ukrainian Verkhovna Rada (Ukraine’s sole legislative authority). The bill proposes a ban on the wholesale, retail, and import of novel tobacco products with unique flavors or tobacco tastes in Ukraine, including IQOS, GIo, and other e-cigarette products. The bill was initiated by dozens of lawmakers.

Asia

【1】On April 19th, the South Korean government abandoned its decision to impose additional taxes on heated non-combustion (HNB) products. Previously, it advocated for levying taxes on HNB products similar to those on cigarettes, which later faced strong opposition from the public.

COMPANY NEWS:

Philip Morris International (PMI)

【1】On April 17th, the U.S. Court of Appeals for the Federal Circuit (CAFC) overturned a district court’s decision. Reportedly, the district court had previously dismissed a patent lawsuit filed by the Florida-based e-cigarette company (HCM) against Philip Morris International (PMI). The case has now been sent back to the court for a retrial.

【2】On April 19th, Philip Morris International (PMI) appointed a new general manager for its South Korea branch. The new general manager, Hannah Yun, has been working for PMI since 1997 and has been the general manager of the Australian branch since 2021. PMI plans for her to take up the position in South Korea in May.

【3】Armenian Prime Minister Pashinyan met with Philip Morris International (PMI) Senior Vice President Gregoire Verdeaux. Pashinyan stated that PMI will carry out scientific research activities in Armenia, which will help reduce the harm of smoking.

【4】On April 20th, Philip Morris International (PMI) announced its net operating revenue for the first quarter of 2023 at $8 billion, an increase of 3.5% year-on-year; net revenue from smoke-free products grew by 14.5% to $2.8 billion; operating profit for the quarter was $2.7 billion, a decrease of 17.2% year-on-year.

Imperial Brands (IMB)

【1】On April 13th, Imperial Brands (IMB) announced that the company expects its operating profit growth to accelerate over the next three years, reaching a median compound annual growth rate. The company’s semi-annual revenue from new tobacco products in Europe was £74 million, and it is expected that the first half of the year’s revenue from new tobacco products will exceed the same period last year.

British American Tobacco (BAT)

【1】On April 18th, the London High Court dismissed applications from British American Tobacco (BAT) and its subsidiary Nicoventures to revoke two heated tobacco technology patents held by Philip Morris (PMI), upholding the validity of PMI’s heat-not-burn technology system patents.

【2】Recently, the “menthol alternative” cigarettes launched by Reynolds Tobacco Company have been well received by smokers. The WS3 (ethyl menthylamide) contained in the cigarettes is similar to menthol, allowing the product to bypass California’s flavor regulations and enter the market. Experts estimate that this cigarette could potentially replace nearly half of the sales of menthol cigarettes.

【3】On April 22nd, anti-smoking groups ASH accused British American Tobacco (BAT) of launching an “e-cigarette war” by complaining about ELFBAR to trade standard officials.

Smoore

【1】Smoore released its financial information for the first quarter. The operating revenue for the first three months of 2023 was 2.527 billion yuan, an increase of 11.9% year-on-year; pre-tax profit was 319 million yuan, and adjusted net profit was 305.6 million yuan, a decrease of 44.8% year-on-year. The revenue from overseas markets was approximately 2.512 billion yuan, an increase of approximately 58.2% year-on-year.

Japan Tobacco (JTI)

【1】Japan Tobacco (JTI) will invest 300 billion yen (approximately $2.25 billion) over the next three years to promote its heat-not-burn product Ploom X, with 200 billion yen (approximately $1.5 billion) allocated for markets outside of Japan.

【2】In 2022, Japan Tobacco (JTI) saw its sales and operating profits in the South Korean market decrease by 1.3% and 1.2% year-on-year, respectively. However, its competitors PMI and KT&G experienced significant increases in sales. Analysts attribute this to Japan Tobacco’s absence from the South Korean new tobacco product market.

Korea Tobacco & Ginseng (KT&G)

【1】On April 19th, e-cigarette manufacturer KT&G increased its existing short-term borrowing limit from 4 trillion KRW (approximately 2.07 billion CNY) to 8 trillion KRW (approximately 4.15 billion CNY). The company has been characterized by its debt-free operations. This adjustment is mainly due to KT&G’s medium-to-long-term vision requiring an investment of around 39 trillion KRW (approximately 202.5 billion CNY).