14 Questions About the Draft National E-cigarette Standard

Question 1:A white list of 122 tobacco oil additives was issued,Subsequent number of tastes in the entire industry、What impact does the consumer experience have?？

General Manager Zhang: The taste allows 122 additives to be extended, excluding tobacco flavor and ice-cold type. The quantity is looser than that of the United States. The United States bans all flavors across the board. Only disposable e-cigarettes are allowed to have flavors, and the replacement version is not allowed to have flavors.

The policy gives e-cigarettes a healthy and legal status, which is good for e-cigarette sales.

1) 122 additives cover the taste of mainstream e-cigarette tobacco oil, but exclude some particularly sweet ones that attract young people, and contain betel nut caffeine in illegal production in small workshops, which ensures the safety of e-cigarette tobacco oil as a whole;

2) The content of precious metals in smoking utensils has also been regulated accordingly to reduce the probability of safety accidents;

3) E-cigarettes emphasize that they must be closed and customers are not allowed to add prohibited ingredients themselves.

It is expected that the legal status of e-cigarettes will be officially established in March next year, which will promote domestic sales and foreign exports of e-cigarettes in both directions.

General Manager Li:

1) The industry supervision trend is obvious, refer to the U.S. FDA regulatory ideas;2) In 2020, many domestic brand manufacturers have come into contact with 114 additives, and preliminary debugging of the discussion draft has been carried out, and the conclusion shows that the taste richness has declined;

3) Referring to U.S. regulatory experience, the conclusion is not obvious whether the FDA ban will have an impact on U.S. e-cigarettes.

Question 2:Will national standards affect the quality of export products？ 

General Manager Zhang: A high probability will affect the quality of exports, and export products will follow industry standards. Non-standard production of export products includes illegal and customized:

1) Illegal production will be banned and the ingredients will be considered unsafe;2) The space for non-standard customization is open to discussion, because it involves food safety, and industry associations and law enforcement departments will reject extrusion.

General Manager Li:Tobacco and oil enterprisesThree major drivers of performance growth:

1) Domestic brands such as Yuexie drive the growth of tobacco oil companies, represented by Yu Peng;2) Disposable tobacco oil production has been the most important driving factor in the industry in the past two years, represented by Zhenwei;

3) OEMs of tobacco oil brands affiliated to major foreign tobacco companies. For example, Yu Peng obtained OEMs from British American Tobacco in 2019.

The recovery of China's tobacco oil industry is mainly driven by the first two factors.

1) The tobacco oil team of domestic brand manufacturers has made certain preparations for the national standard in the early stage. Yueshi launched tobacco flavors this year. Domestic taste restrictions and their impact on sales still need to be continuously observed, which is uncertain;

2) One-time small cigarettes led to the birth of the tobacco oil industry. At present, the national standard has no special obvious restrictions on this, and the domestic one-time tobacco oil production power still exists;

3) The biggest growth driving force for China's tobacco oil is the OEM of British and American tobacco oil and equipment.

Overall, we are optimistic about the tobacco oil industry.

Question 3:Current mainstream products 30-50mg/g，What changes will the subsequent limit of 20mg/g bring?？

General Manager Li: China consumers have no deep understanding of e-cigarettes, and their minds have not yet formed. Adjustment of details is not a very important variable and will not have a big impact.

General Manager Zhang: In terms of concentration, Europe had implemented a concentration standard of 20mg/g 2-3 years ago, and my country's policy trend could be predicted at that time. A concentration limit of 20mg/g has a greater impact on the tobacco category,The original intention of e-cigarettes is to replace traditional tobaccoThe concentration of 30mg/g is not as good as traditional tobacco. In order to achieve the concentration of traditional tobacco, the United States has adjusted it to 50-60mg/g. The concentration of 20mg/g is completely inferior to traditional tobacco. Unless the technology of low concentration and high activity is combined, it can be closer to the effect of tobacco. In terms of taste, everyone doesn't care about the taste and nicotine content, but only cares about the degree of restoration such as fruit flavor, which is mainly achieved through flavoring technology.

Question 4:Can I still make mint flavor?？Except for the mint flavor、What other flavors can be achieved?？ 

You can make mint flavor。The 122 additives can extend many flavors, such as malt germ, tea polyphenols, etc. can extend the flavor of tea, and basically all mainstream flavors on the market can be prepared. Prohibited flavors such as caffeine cannot be achieved because they no longer have additives.

Question 5:The national standard mainly provides benchmark (benchmark test) in terms of consistency，Is there no increase in production thresholds？ 

yes。The overall business model of tobacco oil is relatively good, but the industry's standardization and compliance are very poor. There are no standards for the use, storage, application of nicotine, and how to characterize tobacco oil. The introduction of the national standard is only the first step in standardizing, and there is still a lot of work to be done later. Once the tobacco oil company can be listed, the entire industry can be judged to be mature.

Question 6:There are no approved flavor additives on the white list of additives？Is this a key ingredient? How to flavor e-cigarettes without adding cooling agents?

General Manager Zhang: There are many types and substances of additives. Although the substances are different, the effects can be similar. We can adopt two methods: The first method is actually feasible to add similar additives with different names to circumvent these names. The second method directly causes the final tobacco oil to have the same feeling through a reaction during the preparation of tobacco oil, which can also be circumvented.

General Manager Li: I am more pessimistic about the direct impact of taste. Taste will change. For example, mint flavor, whether it can achieve the original cold mint flavor is uncertain, and the flavor richness achieved by different methods may be different. I think based on current flavors, the taste of tobacco oil will definitely change. However, I don't think changes in taste will have a major impact on consumption data. Based on the U.S. e-cigarette market, the United States has implemented a taste ban, but it has not had a big impact on the e-cigarette market. We also found that changes in taste will not cause major changes in the consumer market. My point is very clear. The 122 additives must have changed the taste, but the market may not necessarily fluctuate much.

Question 7:What do you think about synthetic nicotine？ 

General Manager Li:My view is more pessimistic，This time, the national standard prohibits the addition of synthetic nicotine to electronic cigarettes。Regarding the application of synthetic nicotine in the mainland of China, at present, a pharmaceutical company in Beijing has the only legal nicotine, which means that synthetic nicotine in the mainland of China can only be used in medicine. However, there are very few approved drugs that use synthetic nicotine, so the use of synthetic nicotine in the mainland of China is limited. Regarding the nicotine extraction industry, nicotine extraction will be the only source of e-cigarette raw materials. China Tobacco has many downstream tobacco sources and has high regulatory enthusiasm. Synthetic nicotine is not regulated by Chinese cigarettes, so Chinese cigarettes promote the extraction of nicotine. Regarding the application of synthetic nicotine abroad, we have to see whether subsequent synthetic nicotine can be added to e-cigarettes. Beijing pharmaceutical companies the mainland of China are doing well selling synthetic nicotine in the United States, but we still have to look at the supervision of the industry. If the supervision becomes stricter, the results are unknown. This is an industry where policies are very sensitive.

General Manager Zhang: In addition to the Beijing-based company for synthesizing nicotine, there are also new companies in China preparing to put into production. After the national standard came out this time, the companies that synthesize nicotine had almost installed equipment, which had a great impact on them.

Although synthetic nicotine is sold in the United States and Europe, its safety has not been fully demonstrated. Due to the different technologies of companies, some companies account for half of the left-handed and right-handed syndicates, and some companies can achieve 100% left-handed after de-spinning. Level-handed is useful to the human body, while right-handed is not useful and harmful to the human body. Uncertainty. From the perspective of supervision and interests, the National Tobacco Administration did not promote synthetic nicotine. From a safety perspective, synthetic nicotine production companies have uneven technologies and pose major production hazards. Companies producing nicotine extracted from plants have an extra layer of security. Supplement: (The demand for synthetic nicotine overseas is relatively strong, PMTA has not been included in supervision, the penetration rate has increased rapidly, and synthetic nicotine is not allowed to be added to cigarettes in the domestic market)#p#Page Title #e#

Question 8:The pace and time node for the subsequent implementation of policies？ 

Manager Li: Put it from another perspective

First, no matter from any perspective, supervision is a good thing for the entire industry. After the national standard begins, the tobacco oil industry will slowly be standardized. In 2015 and 2016, China's tobacco oil was basically occupied by U.S. Oil and Nippon Oil. With the supervision of China's tobacco oil manufacturing is also getting bigger and stronger.

Second,Regulation on a global scale，Is the trend tobaccoization or drugization？The United States tends to be tobaccoized. If we become tobaccoized, the industry will be in the regulatory process like old wine in new bottles.

General Manager Zhang: We can make a prediction. Generally speaking, we will come up with standards first and then laws. The policy will be introduced at the end of this year or early next year, and law enforcement agencies are also more urgent to introduce this policy. Because developed countries such as the United States and the United States have decided not to sell traditional tobacco and only e-cigarettes in ten years, in this general environment, after the prediction standards are released, the policy will be clarified in March and April. This is my personal prediction.

Question 9:If the law is introduced in the first half of the year，Will the issue of taxation be implemented at the same time?？ 

General Manager Zhang: Previously, e-cigarette tax was levied at 13% based on food. The tax on traditional tobacco is about 56%, which is far greater than that on e-cigarettes. After e-cigarettes are out of the standard, there is a high probability that there will be a tax increase because they are merged with tobacco. However, it is expected that the tax on tobacco will not be cut at once.It should be a phased increase。

Question 10:nicotine content ratioWill low requirements for foreign e-cigarette brands affect exports?？The proportion of tobacco oil companies exporting abroad?

General Manager Li: According to survey data, exports account for a high proportion. With the implementation of domestic supervision, the proportion will increase rapidly. Currently, Russia, European countries and other countries are in rapid demand for tobacco oil around the world. The proportion of exports will be higher in the future, with a clear growth trend.

Question 11:Will our country's tobacco oil exports be restricted by 20mg/g? Or is it produced according to foreign standards?

General Manager Zhang: Russian customers require 65mg/ml, and American customers require 50mg/ml. If we follow China's standards, we cannot meet the requirements. This requires communication between policies and enterprises, and decision-making lies with the government. If the government allows customization, because the additives are also within the required range, but the content of nicotine added is customized according to customers 'requirements, and sales abroad comply with local laws and regulations, then there is a high probability that countries will allow customization. If customization is not allowed, it will indeed block the big cake of exports. Then we predict that there is a high probability of customization. 20mg/g is the domestic standard and a requirement of the user side. In order to protect China teenagers from addiction, it should only be targeted at domestic sales.

Question 12:Later, the national standard requires a nicotine content of 2%, but now e-cigarettes with a content of 3% are sold on the market.Will there be a wave of inventory clearing or orders reduction in the future？

General Manager Zhang: This situation does happen. Because many e-cigarettes are easy to produce, there is a lot of demand. If the produced e-cigarettes that have been filled with oil are illegal,Many companies will reduce prices and clear goods，There is a high probability that these things will happen。

Question 13:How many tens of thousands of tons of domestic tobacco waste? How much nicotine can you extract?

General Manager Li: Provide a simple algorithm. At present, there are less than 48 million cartons of cigarettes in China. One kilogram of tobacco leaves provides about 33% of tobacco waste. In some data, tobacco will not be disclosed and can be communicated privately.

Question 14:Will the national standard ban some tastes that can induce minors？Even if the #p#pagination title #e#can be called out based on the white list， But not through this taste？ 

General Manager Li: The red line of supervision in China is minors. If taste can induce minors, it will definitely be banned. Explosive beads are a very direct example.flavour capsule，Both Europe and China are banned, because this kind of thing is more attractive to minors.