Stronger China-Russia Relations Accelerate Chinese Companies’ Expansion Into the Tobacco Market

The first tobacco consulting company in Russia, Fedotov, held a themed sharing session titled "Digital" (ЦИФРЫ) at the Moscow Digital Business Center.

This meeting was a business conference organized by Fedotov for leaders in the alternative tobacco products industry. During the meeting, representatives analyzed the current state of the Russian market and existing laws.

Fedotov introduced the current state of the e-cigarette market in Russia. It was reported that there are currently a total of 1,025,000 retail stores across Russia, of which 308,000 sell tobacco products, accounting for about 33%.

Based on retail prices, the disposable e-cigarette market is valued at 180-200 billion rubles, the e-liquid market is valued at 45-50 billion rubles, and the heated tobacco products market is valued at 200-220 billion rubles.

Fedotov shared the top 10 disposable e-cigarettes in the Russian legal market:

· ELFBAR · NOQO · OXIDE · HQD · PONS · XPIPE

· PLONQ · YA MILANO · IGNITE · LOST MARY

Analysis of the Russian E-Cigarette Market

As smokers' cravings for various flavors in cigarettes continue to grow, the Russian e-cigarette market is expected to see growth during the forecast period from 2020 to 2026. This is a simpler and more convenient way to smoke, thereby reducing the consumption of nicotine and other strong tobaccos. Additionally, the increase in e-cigarette flavors has led many smokers to abandon traditional tobacco, and the Russian e-cigarette market is expected to grow steadily in the near future, providing significant investment opportunities for potential investors.

From a product perspective, the rechargeable e-cigarette sector in the Russian market is expected to dominate the overall market revenue share in the coming years. Rechargeable e-cigarettes are a cheap and effective option. The release of various new products has attracted consumers to choose high-quality e-cigarettes. The market growth of the Russian e-cigarette market is expected to accelerate in the coming years. With lower nicotine usage in e-cigarettes, more and more consumers are replacing traditional cigarettes with e-cigarettes, sparking interest in the product. As the variety of e-cigarette flavors increases, the desire to smoke in the country is growing, attracting many consumers' interest, leading to increased demand for the product in Russia, which is expected to benefit the potential growth of the Russian e-cigarette market in the next six years.

With the fashionable designs of various e-cigarettes, more women are using e-cigarettes. The increase in female smokers is expected to stimulate considerable revenue for the entire Russian e-cigarette market in the near future.

Exploring Business Opportunities in the Russian E-Cigarette Market

April 2023 Russian GVE E-Cigarette Exhibition

Due to the war in Ukraine, the exit of Western tobacco manufacturers, and the gradual reduction of foreign e-cigarette brands operating in Russia, the growth of Chinese e-cigarettes in Russia has been realized.

As the Russian tobacco industry heavily relies on support and investment from foreign brands, the exit of international tobacco companies will lead to a significant shortage in the Russian tobacco market, resulting in a substantial increase in the prices of tobacco products sold in Russia.

By the end of 2022, there were over 6,000 stores selling e-cigarettes in Russia, with more than 2,100 in the Moscow region.

According to the real estate platform DNA REALTY, the number of tobacco shops in Russia increased by at least 20% in 2022, with most profits coming from e-cigarette sales.

British American Tobacco announced it would exit the Russian and Belarusian tobacco markets in 2023. Philip Morris International (PMI) and its subsidiary, Philip Morris International, are also considering retaining their business in Russia, as Russia is PMI's seventh-largest tobacco market.

Japan Tobacco has suspended its investments in Russia, and Imperial Brands has transferred its Russian business to local successors.

The article states: "In Russia, e-cigarettes have enormous potential as an alternative to the tobacco market, with Russian e-cigarette consumers accounting for 6.8% of the total number of smokers." "After the United States and Europe, Russia is the third-largest importer of electronic nicotine delivery systems (ENDS) in the world.

"China accounts for 90% of the global market. In 2021, China's exports to Russia reached 82.5 billion rubles. This year, it may increase by 35%, reaching 111 billion rubles."

Russian E-Cigarette Legislation

#p#分页标题#e#

Russian Federation Council

On April 1, the "Honest Mark" officially came into effect in Russia.

On April 11, the State Duma of Russia passed a package of e-cigarette regulatory laws in three readings, including the prohibition of e-cigarette flavor additives and online sales, offline display of e-cigarettes, and raising the minimum price for e-cigarettes.

On April 14, according to Russian media 59.RU, some e-cigarette retail stores in Perm city underwent relevant rectifications. Some businesses covered their e-cigarette counters with shutters, while others used dark glass windows to hide the counters. 59.RU reported that the new e-cigarette ban would not affect large companies but would likely drive small companies out of the market.

Existing distributors only accept legally customs-cleared products, and starting in April, importing e-cigarettes into Russia requires EAC certification for e-liquid products.

Using dark glass windows to hide counters; Source: 59.RU

Under a series of regulatory policies, the Russian e-cigarette market is roughly divided into three situations: large compliant distributors are taking a wait-and-see approach; some large wholesalers are dumping goods, and categories are being hoarded. According to logistics providers, orders have slightly increased.

The price of disposable e-cigarette products in Russia may rise. The reason is that the government has stated it will set a minimum price, making it impossible to purchase e-cigarettes at low prices anywhere. Retailers indicate that the cost of e-cigarettes may increase by 200-250 rubles, depending on how suppliers price them.

Some domestic e-cigarette practitioners also stated that setting a minimum price in Russia is beneficial because the current chaotic pricing of e-cigarettes in Russia disrupts the market.

Most interviewed e-cigarette practitioners hold a relatively optimistic attitude towards regulatory policies. Russia has not explicitly banned flavored e-cigarettes, nor has it clearly defined the scope of additives, indicating that the Russian e-cigarette market can continue to be preserved.

There is still a chance to preserve the market, and proper regulation can also help Russia expand its white customs market.