E-cigarette Industry Daily Report, May 10

E-cigarette Industry Daily Report, May 10

1. Since the launch of heated tobacco products in Japan in 2014, cigarette sales have sharply declined, dropping by 11.7% in 2018, with an expected decline of over 7.5% in 2019. Currently, there are over 3 million smokers in Japan using heated tobacco products.

Policy and Regulations

1. Recently, Appleton, Wisconsin, has initiated amendments to the workplace smoking ban ordinance passed in March this year, reconsidering the previously exempted e-cigarettes. The reasoning is that since e-cigarettes were allowed in vapor specialty shops requiring age and identity verification, they should also be permitted in workplaces like bars that have such verification. This is not allowed by the local health department, and local vapor specialty shops have expressed disappointment over this amendment.

2. The Columbia City Council has conducted a comprehensive update of its smoking regulations, prohibiting e-cigarettes in traditional non-smoking areas, including restaurants and bars. The newly passed ordinance defines smoking as: inhaling and exhaling, burning or using any device with a switch, or heated cigars, smoking devices, pipes, etc., or any form of devices containing heated tobacco or other plants, e-liquids, etc.

3. In response to Oregon Governor Kate Brown's request for funding for the newly launched Medicaid program, state legislators are pushing several bills. House Bill 2270 raises the tobacco tax by $2, reaching $3.33 per pack of 20 cigarettes; House Bill 2123 imposes two different tax rates on e-cigarette products, with a 95% wholesale tax on nicotine e-liquids sold separately from devices, and a 75% wholesale tax on nicotine e-liquids sold in combination with devices; House Bill 2159 imposes a 95% wholesale tax on all smoking devices.

Corporate News

1. Following a notice from the FAD regarding the sale of flavored e-cigarettes to minors in April, Walmart will officially stop selling flavored e-cigarettes, including at its membership chain Sam's Club, starting July 1.

2. Thanks to strong e-cigarette sales and overseas market demand, KT&G Corporation's comprehensive profit increased by 12.8% in the first three months of 2019, reaching 35.11 billion won (approximately $29.85 million). Its heated tobacco product, Lil Hybrid, was a hot seller in the Korean market during the first three months. The Miix and Fiit tobacco sticks, exclusively sold under Lil Hybrid, accounted for 30% of the e-cigarette market. Since the last quarter of December, there has been an improvement in exports to the Middle East, with steady growth in exports to Africa, Latin America, and the Asia-Pacific region. KT&G's subsidiary, Korea Ginseng Corporation, achieved an operating profit of 91.2 billion won in the first quarter ending in March, with sales of 398.7 billion won. Operating profit decreased by 0.8% year-on-year, while sales increased by 1.4% during the same period.

3. Philip Morris International sold 11.5 billion pods in the first quarter of 2019 alone. Based on the successful promotion of IQOS products, Citibank rated Philip Morris International as "Buy" in its latest research report.

Domestic Corporate News

1. Retail mini-programs for e-cigarettes such as RELX, Flow, YOOZ, and MOTI have all suspended services. WeChat stated that these mini-programs were suspected of engaging in the sale of e-cigarettes and other tobacco products, violating the "WeChat Mini Program Platform Operation Specifications," and the platform has taken them down.

2. Xiaomi's ecological chain company, Mo Yu Technology, is planning to launch an e-cigarette brand, with the company's founder being a top 25 employee of Xiaomi, Zhong Yufei. However, it is still unknown whether this e-cigarette product will use the Xiaomi or Mijia brand.