Why Isn't IQOS Sold in China?

There's no need for me to elaborate on how popular IQOS electronic cigarettes are; IQOS is continuously expanding globally, having entered countries like Japan, Italy, South Korea, and Ukraine, with negotiations ongoing in Canada, New Zealand, and Australia. Given IQOS's popularity, why is it not sold in China?

This is a complex issue, and the logic of market economics does not play a decisive role here. Recommended reading: Why is IQOS banned?

From the perspective of global tobacco trends, traditional cigarettes have begun to decline, with the number of smokers, smoking rates, and consumption all decreasing. Influenced by health awareness, the decline of traditional cigarettes seems to be an irreversible trend, posing a severe challenge for all tobacco companies.

IQOS is Philip Morris International's first heated tobacco product, developed with 400 researchers and an investment of $2 billion. Since its launch in 2004, it has been highly favored by Japanese smokers. The potential of the heated tobacco market, both in terms of upstream supply chain integration and the downstream consumer market's continuous education, has allowed more people to appreciate the appeal of heated tobacco products.

The emergence of new tobacco products aims to offset the decline in traditional cigarette consumption and attract new consumer groups. Whether through substitution or attracting new demographics, new tobacco products must generate higher profit margins to create better returns on investment, meeting the fundamental demands of business operations.

Currently, it is believed that until a complete product solution from the national team is launched, the short-term entry of IQOS into China is unlikely. Therefore, companies are not allowed to showcase any successfully developed products under the name IQOS.

Currently, there is a somewhat unique relationship between Philip Morris and Chinese tobacco. On one hand, Philip Morris is a key target of the current regulatory barriers; on the other hand, due to trade policies post-WTO accession, there must be some openings for foreign tobacco companies, with Marlboro still being produced in Hunan and Fujian.

The regulatory measures for heated tobacco products do not clearly define the equipment, and even if the equipment can be sold as an independent product, using this fragmented sales approach as a negotiation condition is not optimal for either party.

In recent years, there has been explosive growth in domestic companies entering the heated tobacco industry. Regardless of the company, they all face one issue: tobacco is a state monopoly product. Unless the state opens up, no company, not even China Tobacco, dares to cross this red line.

From a political standpoint, it is unlikely that there will be leniency in the approval process for market entry, as significant consumer demand directly represents tax revenue for the state. In this fertile testing ground, opportunities will likely be reserved for domestic companies first. After all, several domestic tobacco companies have already developed complete heated tobacco product lines, just waiting for the starting gun.

If we return to the act of smoking itself, the future of heated tobacco products may seem more promising. China has 350 million smokers, accounting for one-third of the world's total, creating a tobacco industry worth over a trillion yuan. Smoking reduces life expectancy, alleviating pressure on national pensions, and also contributes to tax revenue, which is a consideration as well. The tobacco industry is currently a significant source of profit for the state. Unless the national team completes its research and development, the sale of IQOS in China is certainly unrealistic. However, smokers need not be overly pessimistic, as IQOS-type heated tobacco products are less harmful than traditional cigarettes. The public has the right to pursue health, and under pressure, China Tobacco Group will inevitably develop and follow suit.