China’s government in Hong Kong said on Monday that it wants to allow shipments of illegal vaping products through Hong Kong. A move it says will help the city keep its status as an international logistics hub.
The Transport and Logistics Bureau told a Legislative Council (Legco) panel that there has been a significant downturn in air cargo volumes since the ban on the import, sale and manufacture of e-cigarettes and heated tobacco products took effect in April.
During the meeting, Deputy Secretary for Transport and Logistics Pamela Lam said authorities want to exempt sea-to-air shipments of the vaping products from the ban, according to media reports.
“Our transshipment of air cargo has dropped from May to October this year by about 18 percent compared to the same period last year. If this trend continues, Hong Kong’s status as an international logistics hub will be seriously undermined,” Lam said. “So whilst we want to ensure the ban on importation of alternative smoking products, we would like to keep our status as an international logistics hub.”
Lawmaker Frankie Yick, who represents the logistics sector, said the authorities should go further and also allow illegal vaping products to be brought to Hong Kong by land.
“People in the trade would like to have the land-air transshipment to be allowed as well, this is very important because most of the products are made in Dongguan area. It’s more convenient and cheaper to transport that via land to Hong Kong International Airport,” he told reporters.
Another lawmaker, Jeffrey Lam, questioned why the authorities hadn’t realized sooner how logistics companies would be affected by the ban.
“When you drew up this piece of legislation, you should have taken all these into account,” he said. “Why did you not think about this long ago? You shouldn’t be talking about this only at this moment,” he said.
A bill amending the law to allow the sea-to-air shipments is expected to be tabled to Legco early next year.
China’s State Tobacco Monopoly Administration (STMA) plans to limit the number of vapor products a person can carry on them, reports The Global Times.
According to a notice published Nov. 23, a person can possess a maximum of six “smoking devices,” 90 e-cigarette cartridges and 180mL of e-liquid.
On the same day, the STMA and the State Post Bureau jointly announced restrictions on the delivery of vapor products. Each shipment may contain a maximum of two “sets,” six cartridges and 12mL of e-liquid.
Each recipient is allowed to accept delivery of no more than one shipment of vapor products per day.
In April, China’s tobacco regulator approved mandatory national standards for e-cigarettes that came into effect in October.
RLX Technology reported net revenues of RMB1.04 billion ($146.8 million) in the third quarter of 2022, down from RMB1.68 billion in the same period of 2021. The decrease was due primarily to the suspension of store expansions and the discontinuation of older products during the transition to the new national standards, according to the Chinese vapor product manufacturer.
Gross profit was RMB522 million for the quarter, compared with RMB656 million in the same period of 2021. Gross margin was 50 percent, compared with 39.1 percent in the prior-year period. RLX Technology attributed the improvement to a favorable change in channel mix. Because the company gradually terminated partnerships with distributors who did not obtain wholesale licenses during the transition period, its sales contribution from retail stores increased as RLX began to directly provide products to these retail stores. The company benefited also from a decrease in direct cost related to promotional activities.
“During the third quarter of 2022, we remained dedicated to preparing for a smooth transition to the new national standards, which came into full effect on Oct. 1, 2022. Specifically, we wound down shipments of our older products and gradually switched to the National Transaction Platform on a regional basis. We have now achieved full geographical coverage nationwide,” said Ying Wang, co-founder, chairperson of the board of directors and CEO of RLX Technology, in a statement.
Third Quarter 2022 Financial Highlights
Net revenues were RMB1.044.4 billion ($146.8 million), compared with RMB1.676.7 billion in the same period of 2021.
Gross margin was 50.0%, compared with 39.1% in the same period of 2021.
U.S. GAAPnet income was RMB505.2 million ($71.0 million), compared with RMB976.4 million in the same period of 2021.
Non-GAAP net incomewas RMB328.6 million ($46.2 million), compared with RMB452.7 million in the same period of 2021.
“In addition to our efforts to proactively adapt to the new standards, we have focused on fulfilling our social responsibilities, which we see as one of our core competitive advantages. We recently published our annual corporate social responsibility report, summarizing our endeavors with respect to market responsibility, R&D investment, environmental protection, employee career development, and corporate governance. I am proud to share that our latest S&P CSA ESG score ranked ahead of 67 percent of our global peers, representing a powerful commendation of our commitment to sustainability and ESG best practices.”
“We delivered net revenues of approximately RMB1 billion in the third quarter, recording a sequential decrease mainly due to the discontinuation of older products during the transition to the new national standards, as well as the second quarter’s high comparison basis mainly attributable to frontloading of sales in anticipation of the discontinuation of older products. We remain confident that our diversified portfolio will continue to satisfy adult smokers’ needs and that our sales will gradually recover,” said Chao Lu, chief financial officer of RLX Technology.
“Meanwhile, our continuous efforts to improve operational efficiency are proving effective, evidenced by a 30.9 percent quarter-over-quarter decrease in non-GAAP operating expenses. However, our profitability in the coming quarters will be adversely affected by the application of 36 percent consumption tax to e-cigarettes manufacturers since November 1, 2022. Cost control measures will remain at the forefront of our strategic initiatives as we navigate the evolving regulatory environment while maintaining our sustainable long-term growth.”
China’s Ministry of Finance will impose a consumption tax on e-cigarettes sold in China from Nov. 1, according to a notice published on Tuesday.
The taxation policy will further entrench China’s once-scattered e-cigarette industry into the country’s state-backed tobacco monopoly, a major generator of tax revenue for the country, according to Reuters.
According to the Ministry of Finance, a tax rate of 36 percent will be placed on the production or import of e-cigarettes, while an 11 percent tax will be placed on the wholesale distribution of e-cigarettes.
Experts said that the annual sales revenue of domestic e-cigarette makers is about RMB20 billion ($27.36 billion), so the tax may contribute an additional RMB10 billion to the government’s annual revenue, according to The Global Times.
China has long been the world’s largest producer of e-cigarettes, though consumption lags behind that of Western countries.
Smoore presented its Feelm Max disposable technology solution at the Indonesia Electronic Atomization Exhibition (IECIE2022), which took place at the Jakarta International Convention and Exhibition Center.
Speaking at the exhibition, Smoore Vice President Clayton Shen highlighted the importance of technological innovation in driving progress in the vaping industry.
Feelm Max features a ceramic coil technology that offers more puffs and consistent flavor, according to a company press release. It is currently sold in more than 10 countries, including the United States and the United Kingdom. Other features include a semi-translucence mouthpiece and to environmentally friendly packaging.
During his presentation of the Feelm Max, Clayton Shen explained that the closed system is the fastest growing category in the new tobacco market and will claim a significant market share in the long run.
According to Smoore, ceramic coils solve longstanding challenges such as liquid leakage and burnt taste, Ceramic coils, said Shen, are used by leading vapor product manufacturers, such as Reynolds Vapor Co., RELX and NJOY.
One of the most influential exhibition platforms for companies operating in the vaping sector, the IECIE covered an area of over 12,000 square meters in Jakarta, with over 100 exhibitors and more than 10,000 visitors.
In recent years, Southeast Asia has become a new industry hub by virtue of its population base and market development potential. Euromonitor expects the Southeast Asian vaping grow by 29 percent in 2023.
The E-Cigarette Professional Committee of the China Electronics Chamber of Commerce (ECCC) has signed the Independent European Vape Alliance’s (IEVA) recently updated Code for Responsible Marketing.
The Code for Responsible Marketing contains 14 mandatory principles, focusing on the idea that “e-cigarette marketing should not make vaping seem appealing to minors.”
“As confident as we are that e-cigarettes have significant harm reduction potential, we also recognize that they must be marketed responsibly,” said Dustin Dahlmann, president of IEVA, in a statement.
“The signatories therefore only address adult smokers and e-cigarette users with their advertising and marketing to inform them about the products. Youth protection is imperative for us. We are very glad that we agreed on this with our dear colleagues from China.”
China’s ban on flavored vapor products takes effect on Oct. 1 along with other new vaping product standards that were decided on earlier this year, reports Vaping360.
In November 2021, Chinese law was amended to bring the vapor industry under control of the State Tobacco Monopoly Administration, which regulates China’s tobacco products.
Vapers are rushing to buy and hoard flavored vapor products before the ban takes effect on Saturday, according to Vaping360. It is not clear yet if the ban will create a large black market in the country; China is known to punish illicit sellers harshly.
Products meant for export will not have to meet Chinese standards unless the destination country does not have its own specific standards.
RLX Technology reported net revenues of RMB2.23 billion ($333.5 million) for the second quarter of its fiscal year 2022, compared with RMB2.54 billion in the same period of 2021. Gross profit was RMB977.9 million, compared with RMB1.15 billion in the comparable 2021 period.
The company attributed the decrease in net revenues primarily to the suspension of store expansions and new product launches to comply with regulatory requirements.
Chinese authorities have recently moved the vapor business under the regulatory framework for tobacco products. E-cigarette manufacturers now require operating licenses from the State Tobacco Monopoly Administration, while vapor products must satisfy various standards and technical requirements before entering the market.
On June 10, 2022, one RLX Technology subsidiary obtained an STMA license to manufacture e-liquids. On July 22, 2022, another subsidiary was licensed to own the RELX brand and manufacture RELX branded e-vapor rechargeable devices, cartridge products and products sold in combination with e-vapor rechargeable devices and cartridge products.
“Over the past several months, we have made meaningful strides in adapting our business and product development to the new regulatory framework,” said Ying (Kate) Wang, co-founder, chairperson of the board of directors and CEO of RLX Technology, in a statement. “Specifically, we have obtained the License for Manufacturing Enterprise and received regulatory approvals for some of our new products, demonstrating our operational excellence and industry-leading R&D capabilities.”
“In light of the regulatory changes, we are off to a slow start of the sales of our new products that are compliant with the National Standards in the new transaction system mandated by the regulators,” said Chao Lu, chief financial officer of RLX Technology. “Despite the macro headwinds, we will continue to steadily focus on cost optimization while reinforce our product competitiveness under the new regulatory regime to create sustainable, long-term growth for our shareholders.”
The Macau parliament approved an amendment to the law on smoking prevention and control that prohibits the manufacture, distribution, import, export and transport of vaping products in and out of the region.
The law provides for penalties of MOP4,000 ($500) for individuals, with a fine of between MOP20,000 and MOP200,000 for companies.
Although the proposal was unanimously approved, during the debate in the Legislative Assembly, several members said that the government should go further, and impose a total ban on e-cigarettes, reports Macau Business.
Leong Sun Lok expressed concern that the new legislation might increase the smuggling or sale of e-cigarettes through the Internet or lead to an increase in the number of conventional cigarette users.
The Macau Special Administrative Region of the People’s Republic of China’s secretary for social affairs and culture confirmed that they are considering a later ban on e-cigarettes after giving “some time” to smokers who may “still have some in stock.”
Elsie Ao Ieong U also promised to review, within three years, the tax on all tobacco products, which in Macau is around 60 percent of the final price.
Ron Lam U Tou advocated increasing the tax, noting that the World Health Organisation (WHO) recommends a value of 75 percent.
The only Portuguese member in the parliament, José Pereira Coutinho, warned that the legislative revision could harm tourists who are only “passing through,” namely to mainland China, where e-cigarettes are allowed.
The legislative amendment will come into force three months after it is published in the Official Bulletin of the Chinese special administrative region.
The sale, advertising and promotion of e-cigarettes have been prohibited in Macau since 2018.
The government justified the changes to the law with “the strong evidence that this type of tobacco product is harmful to health, and can endanger the safety of people,” recalling that the consumption of e-cigarettes has increased, especially among young people.
The government stressed that e-cigarettes are banned in the neighboring region of Hong Kong and Singapore, and the Taiwanese parliament is also discussing a proposed ban.
So Soul, the rapidly rising vapor brand that began in China in early 2021, has now gone global.
By Timothy S. Donahue
Luna Wang wanted to do something different. She was seeing the products that the vapor industry was offering in early 2021, and she could tell that the industry was changing. Disposable devices were becoming the most popular products to help combustible cigarette smokers quit, but the available devices didn’t offer the same flavor or vaping experience that one could get from an open system. Luna Wang wanted to create something better.
Wang has been in the vaping industry for eight years through various projects. In mid-2021, Wang joined forces with another experienced vapor industry entrepreneur, Peter Zhang. Both also had previous experience working with Fortune 500 companies. Together, they started the So Soul brand in Shenzhen, China, the global capital of e-cigarette manufacturing.
So Soul soon entered the Chinese market, where more than 300 million smokers reside, and quickly found success. While the company also produces refillable pod products, it was its disposable products that really began to boost So Soul’s sales.
“So Soul is a creative and dynamic vape brand which believes that innovation could bring freedom of the soul. So Soul has been a maverick and an unconventional company from the beginning,” said Lisa Li, head of media relations for So Soul. “Our founder, Luna, and the rest of the company’s employees are often considered dreamers. We believe that you shouldn’t have to compromise style for substance.”
So Soul began because its creators believed something was missing in the market. Aside from a device’s appearance, aroma and flavor were two areas that Wang and Zhang felt were lacking in the Chinese vaping industry. The company founded its own research and development laboratory, staffed by the world’s top experts in the field, to develop products that could meet Wang’s high standards.
“Our line of products offers smokers and vapers alike a range of flavors that are rich, smooth and satisfying. Our designs are inspired by the latest trends in fashion, and we’re always looking for new ways to stand out from the crowd,” said Wang. “Whether you’re a beginner or a seasoned vaper, we’ve got something for everyone.”
The company devotes 60 percent of its profits to R&D in an effort to always be improving. It wants its products to stand out for their “combination of style, substance and soul,” explains Wang. “We are dedicated to providing our customers with products that are not only stylish and cutting-edge but also made with the highest quality ingredients and backed by extensive research and development.”
During World Vape Expo Dubai, Wang told Vapor Voice that So Soul has perfected the art of flavor creation, and subtle “fragrances are at the heart of our products.” To accomplish the feat, Wang said that So Soul employs a team of expert mixologists that have years of experience in tobacco product development, and the company only uses the finest ingredients to create its unique flavor blends.
“Our designs are inspired by the latest trends in fashion, and we’re always looking for new ways to stand out from the crowd. Whether you’re a beginner or a seasoned vaper, we’ve got something for everyone,” said Wang. “In a short space of time, we have already become one of the most popular brands in China. And now we’re bringing our products to the world. We strive to always be at the forefront of the latest technology. Our factory in Shenzhen employs over 1,000 professionals who share our commitment to quality and innovation.”
An estimated 3 million customers worldwide have tried So Soul’s products. The company prides itself on being a one-stop-shop for all vapers from beginners to advanced nicotine consumers. Wang said that So Soul product users are stylish, creative and aim to present a safer, cheaper alternative to smoking cigarettes. So Soul offers vaping devices with an advanced mesh coil system and that range in volume from 2 mL to 5 mL of nicotine-based e-liquid.
The company also offers devices that deliver from 600-plus puffs to 10,000 puffs, from bars to boxes and from sleek transparent design styles to designs with exquisitely crafted textures. Although disposable vapes are So Soul’s primary focus currently, Li said the company also provides refillable pod mod devices on demand for its customers.
“So Soul also provides users with a wide range of flavors that are refreshing, sweet, savory and everything in between from Watermelon Ice, Mixed Berry Ice, Blueberry Ice, Spearmint, Blue Razz Lemonade, to Lemon Strawberry Pie, Pineapple Banana Coconut, Strawberry Watermelon Bubblegum, etc.,” said Wang. “There’s something for everyone. We expect to be responsible for offering the best vaping products to vapers at home and abroad and for pushing the entire industry forward.”
Currently, So Soul’s products are sold globally in North America, Europe and Asia. The So Soul XC650 (Vibe), Y650 (Box) and S600 (Peak) are some of the most popular devices in the U.K. and European Union, according to Li. Since So Soul X7000 and Y10000 were launched in early 2022, they have been growing a massive market presence and have become popular in the U.S. and Middle East markets, particularly.
While it depends on how heavily someone vapes and how often they use the device, typically, a So Soul device lasts longer than 92.3 percent of the disposable vape pods in the market, lending to the brand’s popularity. One popular vape reviewer stated that the So Soul X7000 is one of the best disposable vaping devices on the market.
“The retro look really sets them apart from other disposables but, of course, that’s not the only reason why you should consider them,” the reviewer stated. “The flavors that I tried are all very enjoyable to vape on, and that’s only three out of the 20 that they offer, so there’s plenty more to choose from if the flavors that I tried aren’t quite to your liking.
“The tight MTL draw is certainly not what I expected, but it was a pleasant surprise. The draw is similar to a cigarette, and that’s going to be a big plus for anyone looking to use these to quit smoking. Add to the fact that these provide a very satisfying draw and up to 7,000 puffs, and you get a great value for your money.”
One of the major challenges for building the So Soul brand is the varying rules for vapor products from country to country, according to Wang. Regulations in the vaping industry are constantly changing and evolving in nearly every country where e-cigarettes are sold. Those regulatory rules include everything from raising the minimum legal sales age for e-cigarettes in many countries from 18 to 21 and federal, state and local restrictions on flavored e-cigarettes as well as the U.S. Food and Drug Administration recently being given the authority to regulate synthetic products.
Many countries, like China for example, have even unveiled technical standards for e-cigarettes that will go soon go into effect. In a public document, in April, China’s State Administration for Market Regulation listed the requirements for design, chemical compounds and the mechanics for e-cigarettes that domestic manufacturers must meet in order to sell their products.
“In addition to staying current on the laws governing the industry, we will keep up to date on the relevant scientific literature concerning the use of vaping products,” said Wang. “We may also consult with independent external scientific and medical experts to lead technology and ingredients innovation, so that we can fulfill our mission of helping people have easy access to affordable, safe and effective alternatives to traditional cigarettes.”
So Soul’s mission is to promote less risky options for the global tobacco industry. So Soul and its team members are working toward helping create a smoke-free future. Moving forward, she said that the vaping industry is constantly evolving, and So Soul will remain at the forefront of innovation.
“We have a passion for what we do, and it shows in our products. So Soul is more than just a brand—it’s a lifestyle. It’s about being confident, feeling good and living life to the fullest,” said Wang. “So Soul is style, substance … soul. The perfect vape for those who want it all.”
