New Vaping Regulation Notice Signals Industry Standardization in China

Double 11 is just around the corner, and at this critical moment, on November 1st, the National Tobacco Monopoly Bureau and the State Administration for Market Regulation issued a notice titled "Notice on Further Protecting Minors from the Harm of E-cigarettes."

The notice clearly requires that all market entities must not sell e-cigarettes to minors; it urges e-cigarette manufacturers and sellers to promptly shut down e-cigarette online sales websites or apps, e-commerce platforms to close e-cigarette stores and take e-cigarette products off the shelves, and e-cigarette manufacturers and sellers to withdraw e-cigarette advertisements published online.
 

Although the notice only says "urges," it signifies that to further enhance the protection of minors' physical and mental health and prevent them from purchasing and using e-cigarettes online, e-commerce platforms will be prohibited from selling e-cigarettes; the domestic e-cigarette industry is officially beginning to standardize!

Preventing minors from smoking is a common voice from all sectors of society. On the afternoon of November 1st, after the notice was issued, the e-cigarette industry quickly responded, with associations and major companies expressing their firm support and endorsement.

"Prohibiting the sale of e-cigarettes to minors has always been the consistent position of the E-cigarette Industry Committee. Since its establishment on January 14, 2017, the committee has taken the development and unity of industry enterprises as its mission, focusing on guiding the standardized development of the industry and holding a series of promotional meetings for standardized development. The next step will also be to cooperate with government departments to carry out related promotional work."

Regarding the content of the notice, the E-cigarette Industry Committee calls for "all members to study comprehensively and strengthen awareness." With the government's increasing attention and the introduction of relevant policies, the e-cigarette industry will develop in a healthier and more orderly manner!

On the corporate and brand side, after the notice was issued, RELX was the first to respond, stating, "We firmly support and will implement the decision to ban online sales of e-cigarettes; RELX does not serve minors."

On the afternoon of November 1st, around 5 PM, RELX posted on its official WeChat and Weibo accounts, stating that it will fully implement actions to terminate all online sales and advertisements of RELX. RELX has always supported the necessity of strict measures to protect minors. The latest initiative from the National Tobacco Monopoly Bureau and the State Administration for Market Regulation is an important milestone in promoting the e-cigarette industry to implement actions for the protection of minors, which will greatly standardize the orderly operation of market entities. In the future, we will improve offline channel layouts under the guidance of relevant departments and continue to upgrade the Guardian Program.

In an interview with a reporter from People's Daily, Yao Jide, Executive Vice President of the E-cigarette Industry Committee of the China Electronic Commerce Association and Chairman of Hengxin E-liquid, analyzed that "this notice will have a significant impact on China's e-cigarette industry. Especially with the 'Double 11' shopping festival approaching, the notice will have a devastating impact on relevant e-cigarette companies and e-commerce platforms. But from another perspective, it can also calm the industry down and allow e-cigarette companies to focus on product quality."

Yao Jide stated that government regulation of the e-cigarette industry is necessary. "Currently, there is a lack of control over e-cigarettes in China. In the past couple of years, the Chinese e-cigarette market has seen explosive growth, and if the industry continues without regulation, it will lead to chaos. It is recommended that the government refer to the EU's e-cigarette management system to allow the e-cigarette industry to develop in an orderly manner."

Guotai Junan analysis indicates that e-commerce channels account for more than half of e-cigarette sales in China, and small brands rely more on online channels. Banning the online sale of e-cigarettes will severely impact industry growth while accelerating the elimination of small brands from the market. This notice reflects the government's intention to further strengthen management of the e-cigarette industry.

Guangfa Securities pointed out that China is the world's largest production base for e-cigarettes, but it is not a major consumer market for e-cigarettes; most domestically produced e-cigarette products are sold abroad through an "OEM/ODM" model of procurement and production.

Tianfeng Securities previously estimated that the introduction of national standards in the second half of the year is a hard requirement, which will impose requirements on nicotine content, e-liquid components, and additives, as well as regulations on the wattage of smoking devices. The introduction of national standards will increase R&D, production, and sales costs, eliminating a number of small enterprises and further increasing concentration in the industry.

Guotai Junan pointed out that the upcoming national standards for e-cigarettes will also restrict the development of the e-cigarette industry. E-cigarettes are about to face stricter regulations, and e-cigarettes may be included in the tobacco control system, making offline sales channels increasingly important. Convenience stores, KTVs, and other offline sales channels have become important distribution channels for e-cigarette brands. Leading e-cigarette manufacturers have begun to establish offline sales channels, thus being less affected, while e-cigarette brands without offline channels will face fatal blows.