Ispire Technology Inc. announced that it has priced its initial public offering of 2,700,000 shares of its common stock offered at a price to the public of $7.00 per share.
In addition, the company also granted the Underwriters a 45-day option to purchase up to an additional 405,000 shares of common stock to cover over-allotments, according to a press release.
The shares began trading on the NASDAQ Capital Market on April 4, under the ticker symbol “ISPR.”
The initial public offering is expected to close on April 6, 2023, subject to the satisfaction of customary closing conditions.
Proceeds from the offering will be used for:
Approximately 35 percent to develop manufacturing operations in Vietnam and the United States;
Approximately 25 percent for research and development activities, which include efforts to develop new products and new vaping technology;
Approximately 20 percent for the marketing and promotion of the Company’s branded products; and
The balance of approximately 20 percent for general administration and working capital.
US Tiger Securities, Inc. is acting as sole book-running manager for the offering. TFI Securities and Futures Limited and Prime Number Capital, LLC are acting as underwriters for the offering.
In addition, 1,750,000 shares of common stock may be offered by two selling stockholders pursuant to the prospectus.
These shares may be sold from time to time by the selling stockholders, who have not engaged any underwriter in connection any sales they may make. The company will not receive any proceeds from sales by the selling stockholders.
Last year, Shenzhen-based Aspire Global, parent to Ispire, applied to U.S. regulators to withdraw its New York Stock Exchange (NYSE) listing application.
BAT is launching its tobacco-heating product glo in Cyprus, according to The Cyprus Mail. The launch is expected to contribute to the economy and society in Cyprus, boosting employment with new jobs while supporting the country’s network of retailers and distributors.
“BAT is on a transformation journey to build ‘A Better Tomorrow’ by reducing the health impact of our business,” said Vitalii Kochenko, general manager of BAT Hellas responsible for the markets of Cyprus, Greece, Malta and Israel. “We are proud to bring innovation and technology to the local market with BAT’s tobacco-heating product, putting Cyprus amongst the markets that the international group of BAT has chosen for this launch.”
Glo hyper+ in Cyprus is BAT’s latest iteration of its tobacco-heating product. The device combines BAT’s latest tobacco-heating technology, induction heating, and will be accompanied by neo demi slim sticks, which are specially designed to be used with this device.
The two weeks ended April 9, 2022, was the first time Vuse surpassed Juul to become the No.1 e-cigarette brand in the U.S., according to Nielsen. The company had a market share of 35 percent, driven by the Vuse Alto, which represents more than 90 percent of Vuse’s 2021 revenues in the U.S. Vuse has been narrowing the gap with Juul since Dec. 2021.
Several analysts reported on May 3 that Vuse had barely edged past Juul in the Nielsen analysis of convenience store data that covers the four-week period ending April 23. Vuse was at a 34.8 percent market share, while Juul was at 34.4 percent.
It was the first time Vuse held the top market share in the Nielsen report since November 2017. However, for the past 52 weeks, Juul remains ahead 36.6 percent to 30.5 percent.
By comparison, Juul held a 74.6 percent U.S. e-cig market share as recently as May 2019, which is when a series of regulatory actions led to product-reduction concessions by Juul Labs. In the Neilsen report released May 3, NJoy dropped from 3.2 percent to 3.1 percent, while Fontem Ventures’ blu eCigs was at 2.1 percent, down from 2.3 percent.
Juul overtook Vuse as market leader in 2017. Juul, founded in 2015, captured a 68 percent share of the U.S. vaping market within 3 years while Vuse’s market share had reduced to 10 percent from all-time high of 44.2 percent in 2016, according to a press release from Bluehole New Consumption.
While the Juul and Vuse products differ in many ways, one major difference is that the Juul and Vuse Alto products use diferent coils. Juul products use a traditional cotton coil, while Vuse Alto has adopted a FEELM ceramic coil. In 2018, Vuse entered into partnership with FEELM, the flagship atomization brand for SMOORE and launched Vuse Alto later that year. SMOORE has been instrumental in every approved vaping product (Vuse, Logic and Njoy) brand.
Credit: Feelm
In 2021, Vuse announced its status as the No.1 global vaping brand with a full year value share of 33.5 percent in the top five vapor markets (the U.S, Canada, France, Germany and the UK), according to Bluehole. The five markets represent approximately 75 percent of total industry vapor revenue for closed-system products.
KT&G’s share of the South Korean market for electronic nicotine delivery systems (ENDS) rose to a record 40.7 percent by the end of September, reports The Pulse News.
The company’s performance is driven by the success of new tobacco sticks, such as Fiit and Miix, which are compatible with its heat-not-burn cigarette brand Lil.
Cumulative sales of Lil devices surpassed 4 million units this year, compared with 3.22 million in 2020.
The company’s key growth driver has been Lil Hybrid 2.0, which combines KT&G`s proprietary technology using cartridge and stick.
KT&G is also strengthening the lineup of dedicated sticks for its devices. The lineup of Fiit and Miix sticks almost doubled from 11 types in 2019 to 20 today.
The Lil brand has been well received internationally, as well. In a global partnership with Philip Morris International, the KT&G product is now sold in 10 countries, including Russia, Ukraine and Japan.
Kaival Brands Innovations stock was up slightly today as the company’s stock value has decreased sharply after the U.S. Food and Drug Administration issued the company marketing denial orders for some of its Bidi Stick flavored products. It’s third-quarter report results sent them even lower. Shares (NASDAQ: KAVL) were down 43 percent to $2.58 after the company reported Q3 earnings results.
Credit: Argus
Tuesday, the company announced its third-quarter report, which stated that the company earned drastically lower revenues of $3.4 million for the three months ended July 31, 2021, compared to $32.4 million for the three months ended July 31, 2020.
The company now expects revenues for the year to be approximately $68 million, as compared to previous guidance of $400 million. The company stated that now that 93 percent of the vaping market has been eliminated by the FDA, the company expects Bidi Vapor’s market share to, at a minimum, reach pre-premarket tobacco product applications (PMTA) levels, according to Market Watch.
“We believe that the [PMTA] process undertaken by the [FDA] has had a significant impact on the e-cigarette industry. Prior to the September 9, 2021 court-ordered deadline for the FDA to make PMTA determinations for pending applications, we believe that many retailers and distributors were reluctant to take on new inventory, the statement reads. “We believe these retailers were concerned with the potential for being left with inventory that after September 9, 2021 could be ruled adulterated or misbranded by the FDA and, thus, illegal to sell.”
The FDA, which had faced a Sept. 9 deadline to declare which e-cigarettes can remain on the market, said last week that it needed more time before making a decision on products from Juul Labs Inc. and other companies.
In August, Kaival said that it expressed strong support of “enforcement of rules and regulations governing the electronic nicotine delivery systems industry” and that it exceeded stringent FDA compliance mandates.
Bidi Vapor also announced it will continue to manufacture and market its Artic (menthol) Bidi Stick in the United States despite receiving a marketing denial order (MDO) for the product, according to a trading update issued by Kaival Brands Innovations Group.
The company said Tuesday that it believes that in the longer term, the removal of all synthetic nicotine products in the U.S. market could prove to be a positive event for it. Based on previous FDA decisions, it said it expects that Bidi Vapor’s naturally derived nicotine products will remain on the market following the completion of the FDA’s premarket tobacco application process.
E-cigarette use in Taiwan has tripled since 2018, reports The Taipei Times, citing a study by the Ministry of Health and Welfare’s Health Promotion Administration (HPA).
In 2018, e-cigarette use was at 0.6 percent; in 2020, that rate grew to 1.7 percent, according to the study, which looked at responses from 25,000 people 18 years and older.
The highest e-cigarette use rates were found in men ages 26 to 30, at 6.3 percent, and women ages 21 to 25, at 4.6 percent.
“To put this growth into perspective, use of traditional cigarettes grew only marginally over this period, from 13 percent in 2018 to 13.1 percent in 2020,” said Lu Meng-ying, HPA Tobacco Control Division official. “The situation needs urgent attention, especially as new e-cigarette users are almost all young people.”
Most respondents said they use e-cigarettes out of curiosity while 17.3 percent use them to quit smoking combustible cigarettes and 9.7 percent use them because friends use them.
Use of flavored tobacco products is increasing as well, from 8.2 percent in 2018 to 15.6 percent in 2020. Majority of the increase was seen in women.
“There are more than 1,200 additives used in flavored tobacco products, and the vast majority of them are chemically derived,” Lu said. “The goal of manufacturers is to prevent new smokers, especially young women, from being turned off by foul smells.” He added that the effects of long-term use of flavored products are not well understood.
E-cigarettes have been banned in India since 2019, but the ‘grey’ market continues to grow.
By Vapor Voice staff
There are more than 100 million cigarette smokers in India. The country suffers from over 1 million tobacco-related deaths each year. But Western-style cigarettes account for only a fraction of tobacco consumption in India. According to data from the Global Adult Tobacco Survey (GATS) of 2016–2017, India has the second-largest tobacco-consuming population in the world (China is first). An estimated 267 million Indians use tobacco in some form.
Tobacco also plays a significant role in India’s economy. More than 4.2 million hectares of farmland in India are dedicated to growing tobacco. The government also owns a 28 percent stake in ITC, India’s dominant tobacco company. Currently, there are only 19 smoking cessation centers for the nearly 270 million tobacco users, and there is no national policy to make telemedicine or other medical support available, according to the CDC Foundation.
Under the guise of preventing potential health risks to the country’s youth, India banned the “import, manufacture, sale, advertisement, storage and distribution” of e-cigarettes in September 2019. Ministers at the time said the decision aimed at averting health risks related to e-cigarettes. The Indian vaping ban came amid an updated guidance from the World Health Organization (WHO), which encouraged the prohibition of e-cigarettes. India’s ban does not cover the personal consumption of vaping products, although the rule is ambiguous and doesn’t define personal consumption.
Before the vapor ban, many vapers would purchase their products at tobacco shops, known as paanwalas. These shops sold mostly basic 510-threaded vaping devices, low-quality shisha-flavored e-liquids and cheap closed pod systems, according to sources familiar with vaping in India. Shop owners knew little about tobacco harm reduction (THR) and the role vapor products play. A handful of large importers were supplying the shops, and in 2014, ITC even released its own e-cigarette, Eon, that it marketed through the local shops.
India also had a small fraction of vapers, mostly former smokers, that understood the THR concept of vaping and its purpose as a quit smoking aid. “They opened a few shops and were quality conscious. They wanted to help customers stop smoking combustible cigarettes,” said a former vape shop owner, who asked to remain anonymous due to the illegal nature of vaping products in India. “These shops sold mostly high-end brand devices and e-juices from trusted manufacturers. “Almost all of them had online shops and social media presence and nationwide reach, and a few also had brick-and-mortar stores.”
Then came the ban. India’s legal vaping market abruptly stopped overnight. All websites were shut down immediately, sources said. The law, as written, is strict with severe penalties. Initially, all players in the vaping industry in India were terrified. “After some time passed, with little to no enforcement action, the market began to slowly reemerge,” said another former participant in the Indian vape market. “Vendors returned, although in much smaller numbers. The cheap, low-quality vapes are back at the bigger paanwalas. Often these shops do not care what age a customer is when selling tobacco products.”
Amplifying the issue is that most of the employees running the paanwalas do not possess the knowledge to properly educate customers about the usage and maintenance or the pros and cons of vaping products, according to the former vape store owner. “This market needs restrictions and regulations. The less educated, less privileged masses perceive vapes as just another way to exhale dense clouds,” he said. “Also, this market is less afraid of the law because, in most places, the local police have arrangements with small stalls/shops/kiosks of all kinds, where they collect a weekly fee (called a hafta) to look the other way when they flout rules.”
Vaping products are even being displayed on some store shelves now in India. A few of the biggest paanwalas in the cosmopolitan cities reportedly sell Juul and other high-end hardware. It’s not plainly obvious everywhere, and the specialist “vape only” vendors are all clandestine. Most of the specialists are discerning and do not entertain new customers without a reference from a known customer.
“The black market is not large at present. However, as India has a huge population (1.4 billion), even ‘not large’ can be sizable. Unofficial estimates say India had a million vapers before the ban, and there are still approximately 200,000 to 300,000 vapers in the country,” the former market player said. “The penalty for selling vapes to anyone—even an adult—is up to three years in prison and fines up to INR500,000 ($6,700). You will be amazed to know that the penalty for selling [combustible] cigarettes to a minor is only INR200 ($2.75) with no imprisonment. How is this allowed?”
According to Anupam Manur, an assistant professor of Economics at the Takshashila Institution in Bengaluru, banning vapor products has caused the government to lose all controls over the products.
“If a seller is selling an illegal product anyway, what difference would the age of buyer make—whether it is above or below 18 years?” Manur wrote in Business Insider. “Furthermore, since it is illegal, would it make sense for a seller to ensure product quality and safety? There have been numerous reports of substandard and potentially dangerous products being sold in India on the black market,” he said. “It would behoove the government to learn the lessons from the U.K. and the U.S. and choose a harm reduction approach, which would involve developing a regulatory plan for e-cigarettes that maximizes smoking cessation among adults while limiting youth uptake.”
The WHO was more enthusiastic about India’s approach, even giving Indian Health Minister Harsh Vardhan a top award for pushing the policy. Vardhan is a former WHO advisor and was until recently the chair of WHO’s executive board, and hence deeply steeped in the WHO’s anti-THR stance. “His leadership was instrumental in the 2019 national legislation to ban e-cigarettes & heated-tobacco products,” tweeted the WHO secretary-general, Tedros Ghebreyesus, after announcing the award. “Thank you, minister!”
Samrat Chowdhery, director of the Association of Vapers India (AVI) and president of the International Network of Nicotine Consumer Organizations, a global consumer advocacy group comprising 40 national and regional bodies, does not expect anything to change in India’s vapor market any time soon.
Samrat Chowdhery
Politics aside, the negative impact of the ban will become clear in time, he says, adding that the nations that have embraced vaping products as THR tools are reaping the rewards of accelerated smoking declines after allowing (and in some cases encouraging) smokers to make the switch.
Countries that have experienced lower health costs because they have embraced vaping products and invested in THR may one day offer enough evidence to force a shift in India’s policy toward e-cigarettes, according to Chowdhery. “Currently, Thailand is the only other major country in Asia that bans safer nicotine inhalation alternatives, and it is worth noting along with India, it too has a state-run tobacco enterprise which is facing competition from replacement products,” said Chowdhery. “China is moving toward regulation too. This ‘ban group’ is likely to shrink further over time.”
If electronic nicotine-delivery system products continue to be available in some form in India, the number of ex-smokers who have switched will continue to grow, according to Chowdhery. With the ban slowing this transition and potentially even halting it, he believes at some point the vaping ban will create its own critical mass to call for a rethink.
“Another possibility is that the courts intervene and either discard the law altogether or create caveats which render the law infructuous. Such challenges require substantial financial backing, which established commerce in this field can support,” said Chowdhery. “The courts have so far been reluctant to delve into this issue because of the emotional ‘think of the children’ pitch attached to it, but over time, rationality and pragmatism will win over. A country with this large of a tobacco problem cannot for long ignore effective measures to reduce related mortality and morbidity.”
Malaysia’s vapor market has grown to an estimated $558 million with the help of small-sized and medium-sized businesses.
By Vapor Voice staff
The Malaysian vaping industry is valued at MYR2.27 billion ($558 million). The figure is one of the primary findings of the recently released Study on the Malaysian Vaping Industry report, commissioned by the Malaysian Vape Chamber of Commerce (MVCC). The report states that the size and scale of the Malaysian vapor market continues to grow, fueled by a majority of small-sized and medium-sized enterprises (SMEs) and driven by Malaysian entrepreneurs.
“It is estimated that there are more than 3,300 businesses directly within the vape industry in Malaysia with a workforce of more than 15,000 workers,” MVCC president Syed Azaudin Syed Ahmad said. “This industry is contributing positively to the national economy, and if regulated appropriately, will also contribute to the government’s revenue.”
Malaysia is in good position to attract foreign direct investments (FDI) into the vaping sector as other sectors are seeing challenges to attract investments, according to Syed Azaudin. Malaysia has approximately 1.12 million vapers or approximately 4.9 percent of the total Malaysian population, according to the National Health and Morbidity Survey 2019 from the Malaysian Ministry of Health.
“MVCC believes the vaping sector is ready and capable to attract quality FDIs given its established ecosystem that global investors and multinational companies would find appealing,” he said. The global e-cigarette and vape market size is expected to reach $67.31 billion by 2027, registering a revenue-based CAGR of 23.8 percent from 2020 to 2027, according to a study conducted by Grand View Research.
“Correspondingly in Malaysia, the growth of the vape industry is on an upward trend, showing a CAGR growth of 44 percent in 2019 compared to 2018, which represents a significant economic potential for the country,” the report states. “Comparatively, other up-and-coming fast-growing sectors in Malaysia, such as the growth of e-commerce, is expected to increase at a CAGR of 14.3 percent between 2020 and 2024 while the technology market is expected to garner a CAGR of 8.9 percent between 2019 and 2023.”
The report estimates that workers in the vape industry were paid up to MYR450 million in wages in total in 2019. The MVCC commissioned Green Zebras, a market research agency, to conduct the study. The study was aimed at assessing the value of the Malaysian vape industry and its contribution to Malaysia’s economy.
“Regulating the growing vape industry will go a long way not only in contributing to Malaysia’s economy but also in expanding FDI into this industry, which is growing rapidly in the region,” the report states. “Ultimately, regulating this industry has many positive knock-on effects, including adding revenue in the form of taxes to the government.”
The Malaysian government implemented an excise tax on vape devices and e-liquids, which took effect on Jan. 1, 2021. Vaping devices are subject to an excise duty of 10 percent as well as an excise duty of MYR0.4 per/ml for e-liquids. However, the tax regime has since been clarified that it is only a tax on nonnicotine-based products. Syed Azaudin says the organization believes that the tax regime needs to be broadened to include e-liquids with nicotine, which make up 97 percent of the Malaysian market. That would allow the vapor market to contribute to the Malaysian government’s revenue more effectively.
“The Malaysian vaping industry has significant potential that can be unlocked with practical and comprehensive regulation that must include the use of e-liquids with nicotine. This will spur the growth of SMEs, which will in turn create jobs and generate tax revenue for the government,” added Syed Azaudin. “MVCC has spearheaded this study in order to provide the government with a solid data-driven foundation to immediately introduce regulations on the vape industry. Even though the government had decided in 2016 to introduce regulations for this industry, none have been instituted so far for the past five years.”
Credit: MVCC
Another recent survey suggests that a large majority of Malaysians want the government to regulate the vaping industry more heavily. The Malaysian Insights & Perspectives on Vape survey, commissioned by the Malaysian Vape Industry Advocacy (MVIA), showed that 87 percent of Malaysians agree that a tax should be imposed on vaping products, and 74 percent think that the revenue collected from vape products could be spent by the government on important sectors, such as education.
A sample size of 1,025 Malaysian adults were polled and “is reflective of the perception of all Malaysian adults nationwide.” Also conducted by Green Zebras, the survey was commissioned to get a better understanding of Malaysians’ perceptions on vaping and its use as a method of tobacco harm reduction, according to the MVIA.
The MVCC report states that the additional benefits of regulating the industry and providing standards are higher quality products that will likely strengthen demand, elevate innovation and broaden consumer choices. The overall market will benefit from factors like cost-effectiveness as well as strengthening of distribution channels, which will drive growth. Local players will also be able to expand operations both globally and locally.
“It is expected that regulations will create certainty and lead to more investments into the market to provide choice and innovation of products, thereby elevating and spurring SMEs to raise their standards, quality and expertise,” said Syed Azaudin. “As the vape market continues to expand worldwide, this will also enable Malaysian players to have the opportunity to compete in the global market.”
It has long been anticipated that the tobacco monopoly in China would one day regulate electronic nicotine-delivery systems (ENDS). On March 22, China’s Ministry of Industry and Information Technology (MIIT) and the State Tobacco Monopoly Administration (STMA) released a draft proposal to overhaul rules governing the ENDS market.
Shares in RLX Technology, parent to China’s market-leading RELX e-cigarette brand, plunged in the wake of the announcement. Just two months after the vapor maker’s billion-dollar debut on the New York Stock Exchange, RLX shares fell by nearly 45 percent to $10.69 per share on March 22, having reached a high of $19.46 per share on March 19.
An online copy of the “Decision on Amending the Implementation Regulations of the Tobacco Monopoly Law of the People’s Republic of China” suggests the government intends to regulate ENDS like ordinary cigarettes. That could mean special licensing requirements and much higher taxes of up to 65 percent instead of the 13 percent value-added rate companies currently pay. The ministry is seeking public comments on the draft regulations until April 22. The implications of the draft regulations could be far-reaching. With an estimated 300 million smokers, China is the world’s largest potential market for vapor products.
“In view of the homogeneity of new tobacco products such as e-cigarettes and traditional cigarettes in terms of core ingredients, product functions and consumption patterns, new tobacco products such as e-cigarettes shall be implemented in accordance with the relevant provisions of the Regulations on Cigarettes,” the draft proposal states. “The implementation … will greatly enhance the effectiveness of e-cigarette supervision, effectively regulate e-cigarette production and operation activities, solve the product quality and safety risks of e-cigarettes, false advertising and other issues, and effectively protect the legitimate rights and interests of consumers.”
While the news will have some impact on the global ENDS market, the Chinese manufacturers producing for international markets will likely continue operations. “Depending on how they regulate and to what extremes, it could be devastating to the companies operating in the consumer market in China,” said a representative of a major China-based ENDS manufacturing company, who asked for anonymity. “We expect that there will be players that remain in the market, possibly working alongside the Chinese government in the promotion and sales of vaping products. Right now, we are just waiting for a better understanding of what this means for China’s domestic market. A worst-case scenario would be an outright ban on all products, but this is unlikely.”
The draft proposal states that the regulations will have three purposes:
To promote the rule of law in the supervision of e-cigarettes;
To conform to the characteristics of e-cigarette products and current international regulatory practices;
To enhance the regulatory effectiveness of e-cigarettes.
There are 350 million smokers in China. The country consumes an estimated 1 trillion cigarettes per year. As the largest cigarette market in the world, it would make sense for China to embrace vapor products as a less risky alternative to combustible tobacco. However, with a state-run tobacco monopoly and billions of dollars of taxes at stake, industry experts say the Chinese vapor market is complicated and slow to implement regulations.
Despite impressive growth, China’s vapor market is still insignificant compared to its tobacco market. As of the end of 2019, an estimated 7.4 million people in China were regular e-cigarette users, according to Cloris Li, a spokesperson for Smoore International, parent to FEELM and the Vaporesso brand.
“That means the electronic cigarette industry in China can still potentially convert a large number of smokers,” said Li. “Considering China’s status as the biggest tobacco market, it has enormous potential to continue the current rapid growth rate. In 2018, Chinese e-cigarettes and auxiliary products had a market size of CNY5.52 billion [$848.38 million], and it is predicted to grow more than double to CNY11.28 billion by 2022.”
Vaping products in China are not considered tobacco products like they are in Europe and the United States. Instead, e-cigarettes are considered a consumer goods product. During the E-Vapor and Tobacco Law Virtual Symposium, sponsored by the law firm Keller and Heckman, two industry experts discussed the current vaping and tobacco market in China. One speaker noted that because e-cigarettes do not fall under the definition of tobacco as defined under the country’s monopoly laws, China, at the time, had yet to implement any major restrictions on vapor products.
With little regulatory guidance, China’s vapor market has been booming both in terms of domestic consumption and manufacturing exports. China, where the modern e-cigarette was invented, has become the manufacturing hub of the fast-growing global vapor industry. This has led to the rise of several major corporations, including the world’s most valuable vapor company, Smoore International.
When Smoore went public in mid-2020, its stock grew by nearly 150 percent on its opening day of trading on the Hong Kong Exchange. Smoore stock did not suffer after the MIIT announcement. The value of Chinese e-cigarette maker RLX Technology, parent to the RELX brand, jumped 146 percent during its trading debut in January 2021 after raising $1.4 billion in its U.S. initial public offering, before dropping drastically after the MIIT announcement.
In its prospectus, RLX stated that vaping products only have a 1.2 percent penetration rate in China compared with 32.4 percent in the U.S. The Electronic Cigarette Industry Committee estimated China’s 2020 e-cigarette sales at CNY14.5 billion, an increase of 30 percent from 2019 (CNY11.2 billion). By comparison, the U.S. e-cigarette market in 2019 was worth $5.34 billion and is expected to reach $6.50 billion in 2020, according to Grandview Research.
RLX is doing its part to accelerate e-cigarette sales in China. In early 2020, the company launched its two flagship RELX vape shops in Shanghai and Beijing. Today, RELX has partnered with 110 authorized distributors to supply its products to over 5,000 RELX-branded partner stores and over 100,000 other retail outlets nationwide, covering over 250 cities in China, according to its prospectus. Revenue for the company nearly doubled in the nine months ended Sept. 30, 2020, to $324 million, with a net income of $16 million.
Along with the Smoore and RLX initial public offerings, China’s vaping industry continues to attract lots of attention from the capital market, according to Li, it is unknown if the proposed regulations will hamper that attention. “This year, in 2021, many more second-tier brands are spearheading efforts to acquire financing to expand the market [in China], especially markets in lower tier cities,” Li said. “For example, MOTI intends to invest cny1 billion to open 10,000 stores. Snow Plus even announced its intent to distribute future stock shares to distributors to open more stores.”
To date, the Chinese government has passed two major pieces of legislation for vapor products. In 2018, it made it a crime to sell a vapor product to anyone under 18 years of age. In November 2019, the government prohibited online sales of vapor products to prevent youth initiation. In 2020, the country passed the Law of the People’s Republic of China on the Protection of Minors. That law is aimed at preventing parents or other guardians from “indulging or instigating minors” to smoke or vape.
The Chinese government wants to avoid the rapid rise in youth vaping that occurred in the U.S. If the U.S. figures replicated domestically in China, it could harden Beijing’s stand on the category, according to a 2021 report from ECigIntelligence. For now, e-cig usage among Chinese youth remains relatively low. A 2019 survey by the Chinese Center for Disease Control and Prevention found that 8.6 percent of high school students aged between 15 years and 18 years in China had used “tobacco” products during the previous 12 months.
Between July and August 2020, authorities collected comments on a bill that would restrict the public use of e-cigarettes nationwide and establish specific areas where vaping would be allowed. “The amendments to the Law on the Protection of Minors would prohibit vape stores from operating near schools, ban e-cigarette sales to minors and vaping in schools, kindergartens and anywhere else where young people are gathered,” the report states. “The bill would also require vendors to ask for an identification document if in doubt about a purchaser’s age while shop owners would be required to put up a prominent ‘no sales to minors’ sign. If the proposals are adopted and e-cigarettes are regulated under the same umbrella as traditional tobacco products, it would be China’s first national law specifically restricting e-cigarettes.”
In 2020, the Chinese government also floated the idea of banning vapor products completely. Another proposal suggested that e-cigarettes should be regulated as tobacco products while prohibiting their promotion as smoking cessation products. The authors of the study point out that Chinese rules can impact a market virtually overnight. Prior to the country’s ban of online sales of vapor products, there were hundreds of thousands of products available on the internet. The day after the announcement, an online search for e-cigarettes would have yielded zero results. “When the authorities do put something in writing and announce something that they want to put into effect, it can happen oftentimes almost immediately,” the report states.
While the Chinese government is yet to release any vapor regulations concerning components and manufacturing, several industry players have come together to self-regulate the industry. In 2017, draft regulation or standards were developed on the industry level. While not mandatory national standards, the rules give a good sense of what the industry considers sensible in terms of specifications, requirements and limitations.
“The same holds true with the group standards concerning the raw materials, about the diluents, the flavorings, and some requirements as it relates to physical, chemical, hazardous substances. They go into some test methods,” a presenter at the Keller and Heckman seminar said. “Not always, but typically, the authorities will look at these group standards, voluntary standards, and start to adopt some of that language when they make mandatory national standards. So, having a good sense of what these [recommended standards] look like … that would be important.”
Further complicating China’s vapor market is the China National Tobacco Company (CNTC), the state-run tobacco monopoly. If the monopoly chooses to enter the vapor market, it could devastate the independent vape shops that proliferate the Chinese market. “The state monopoly has yet to signal clearly how it will regulate e-cigarettes or whether it will sell them. If it does, it has the power to regulate its competitors out of the market,” the report states.
The industry is acutely aware of this risk. In a November 2019 interview with Reuters, one investor in a Chinese e-cigarette startup compared the combined regulatory and competitive threat posed by CNTC as “a knife on the neck.” CNTC is a source of major funding for the Chinese government. Its contribution accounted for an estimated 5.45 percent of the country’s tax revenue in 2018. That amounts to cny10.8 trillion, according to media reports.
If CNTC were to enter the vapor market, the monopoly’s existing 5 million domestic retail outlets could present a major challenge for private vape shop owners. Kate Wang, CEO for RELX, told Reuters (before the draft regulations were announced) that she’s “not worried” about the government’s impact on the sector. The products will continue to remain available, she said, “as long as there’s proof that this is a good solution for smokers.”
Research and Markets has published a new report on the world’s largest potential market for heat-not-burn (HNB) products, China.
The report provides an overview of China National Tobacco Corp. (CNTC) subsidiaries’ HNB marketing activities from 2017 to 2020.
The report reviews all HNB products that were officially released in domestic and foreign markets as well as cooperation ties in the Chinese HNB market.
China Tobacco has a market of 300 million smokers with a significant part active HNB users. The domestic HNB sector is dominated by CNTC. It has launched HNB products in Sichuan, Yunnan, Guangdong, Anhui, Hubei, Heilongjiang and other provinces, and has been actively engaged in overseas markets. CNTC HNB brands are presented in many foreign markets, mostly in Asia countries and eastern Europe.
Most HNB devices are promoted with dedicated consumables. HNB devices are either produced at own facilities of CNTC subsidiaries or are OEM versions developed by third-party manufacturers. The CNTC subsidiaries with the largest number of HNB devices in the domestic market are based in Sichuan, Yunnan and Guangdong.
The report includes a brief review of HNB electronic devices produced in cooperation with major Chinese hardware manufacturers. There is also a brief description of companies engaged in the Chinese HNB market, and a complete list of HNB products with release dates and corresponding references in domestic and foreign markets, a map of presence of CNTC HNB brands in foreign markets and a timeline of CNTC HNB products by release date.
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