No exclusive operation: Traditional tobacco has gone through the path of exclusivity/disguised exclusivity. When the electronic cigarette category is put on the market, it is proposed not to operate in an exclusive manner to prevent it from taking the old path.

 

Registration for export of electronic cigarette products: It is not feasible in terms of operability. Overseas companies may still produce when they entrust domestic production, and registration will bring obstacles to sales. The cancellation of this article is beneficial to export-side production and sales.

 

Article 33 "E-cigarette products that are not sold in China and are only used for export shall meet the laws, regulations and standards of the destination country or region; if the destination country or region does not have relevant laws, regulations and standards, they shall meet the requirements of the laws, regulations and standards of the destination country or region. my country's laws, regulations and standards related requirements", export products should only meet the requirements of the destination country.

 

In general, this e-cigarette management method is more feasible, and the license system is implemented for the production, wholesale and retail of e-cigarettes, which is not much different from the draft. Electronic cigarettes are defined as atomizers, and various forms of products appear on the market, which are uniformly regulated by atomizers. Finally, other new types of tobacco products are proposed, and new types of tobacco products that may appear in the future are included in the scope of control. Refer to Article 44, "Other new types of tobacco products shall be implemented in accordance with the relevant provisions of these Measures."

 

export business perspective

 

The intensity of e-cigarette policy releases in the past two years has exceeded that in the past 10 years. This management approach is more beneficial than detrimental to large export companies, because head and neck companies can do better in terms of talents and compliance. , able to respond to policy changes, but it is more unfavorable for small enterprises, because small enterprises will be more difficult to achieve at the compliance

level.

 

From the perspective of external markets, the Middle East and South America will see greater growth in 2022; the European market is more stable than the US market and is expected to grow steadily; the US is still the largest demand market.

 

The e-cigarette market is growing rapidly, so supervision needs to be controlled. This kind of supervision is expected to be relatively easier than traditional tobacco. For example, e-cigarettes can be installed with face recognition, child locks, etc., and the regulatory technology is expected to be gradually modernized.

 

From January to February, the company's exports continued to grow rapidly. The main sales regions are Europe, America, Southeast Asia, etc. The main products are disposable cigarettes and refills.

 

Brand's point of view

 

Flavor restrictions: Article 26 "Prohibits the sale of flavored electronic cigarettes other than tobacco flavors and electronic cigarettes that can be added with atomizers by themselves." This time, the taste restrictions are very clear, requiring tobacco flavors. From the perspective of brands and factories, the research and development and innovation of tobacco flavors will be increased. From the perspective of consumer demand, after the sale of fruit flavors is banned, some young people are expected to withdraw from this consumer group. There is no specific product in the supervision. Whether it is included in the scope of supervision is relatively good for herbal atomization products.

 

At the channel level: there were reservations about retailers before, and strict requirements for wholesalers (required to be reported to the State Council for approval). This time the relevant concepts are blurred (Article 28 "Enterprises holding tobacco monopoly wholesale enterprise licenses, approved by the State Council tobacco monopoly After the approval of the administrative department, the wholesale business of imported products can only be engaged in after changing the scope of the license”). It is possible that the approval authority of wholesalers will be delegated to the provincial or lower level; this flavor restriction will have a big blow to retailers. On the whole, the channel is expected to undergo a major transformation and reshuffle. In the future, it may not be a collection store or a specialty store model, because the pressure of relying solely on tobacco flavors will be great. It is expected that the electronic cigarette channel will be sold to convenience stores and tobacco in the future. Network transformation. What needs to be tracked later is whether provinces and cities will control the sales of non-tobacco flavored e-cigarettes from May 1.

 

Detailed rules: The detailed rules of various provinces and cities may be introduced in April, and the implementation rules of different regions are expected to be different.

 

Overall impact: It is good for top brands, which have a stronger ability to respond to policy changes, channel shuffling and transformation.

 

Q&A

 

Q: Can tobacco flavors be differentiated? Under the constraints of 101 additives in the future, what is the room for development?

 

A: Among the 101 additives, 3 are used for solid electronic cigarettes, cellulose, calcium carbonate, and guar gum, so only 98 are left. Tobacco taste as the main tone, can make differences, for example, there can be differences in flavoring, menthol, etc.

 

Q: What is the sales situation of electronic cigarette brands in China from January to February?

 

A: From January to February, the top brands remained the same as last year and slightly improved, while small and medium-sized brands were more affected and exited. Brand owners basically have 1-2 months of inventory, a small amount of inventory in channels, and about 30 days in terminal inventory. The ideal inventory digestion will take at least 2-3 months. The new method will be implemented on May 1, and the pressure of destocking is relatively high.

 

Q: The regulations of this draft will be implemented on May 1st. Will the relevant licenses be issued before that?

 

A: It is highly likely that it will be implemented on May 1. Practitioners need to apply for a license before. The information has been reported last year. It is expected that specific methods on how to apply for a license will be introduced in the near future, but all the processing will be completed before May 1. If the time is too tight, the leading export-oriented enterprises may release the first batch, and then distribute them in batches. It is expected that a grace period will also be given to enterprises that have not yet issued a license after applying.

 

Q: How do you view the follow-up supervision of synthetic nicotine in the U.S. market?

 

A: There is a high probability that it will be classified into traditional nicotine supervision, but it will take time to implement; the production of synthetic nicotine is mainly to avoid supervision in the US market. In fact, the follow-up should focus on the issue of cost. At present, the cost of synthetic nicotine has no advantage (the volume is still small). ).

 

Q: The follow-up supply and demand of natural nicotine?

 

A: The amount of nicotine extracted is related to the yield of tobacco leaves and the tobacco stems in tobacco leaves. Globally, the production capacity of tobacco leaves is surplus, and there is also a large amount of tobacco leaves in China. There is not much problem in extracting nicotine from tobacco waste generated in tobacco production nationwide. There is no problem in ensuring the amount of nicotine required for the production of electronic cigarettes. The nicotine content in tobacco is generally 1%-3%, and the highest variety is more than 8%. If the demand for nicotine increases more, tobacco varieties with higher nicotine content can be planted to meet the demand.

 

Q: Will plug-in products be regulated in the future?

 

A: When it is sold as a whole, it will still be regulated according to the electronic cigarette, refer to Article 40 (atomized substances refer to mixtures and auxiliary substances that can be fully or partially atomized into aerosols by electronic devices); if only as irrelevant It may be appropriate to avoid the flavoring sticks for sale.

 

Q: Can traditional tobacco retail stores sell electronic cigarettes under the new measures?

 

A: Traditional tobacco retail outlets need to add e-cigarette sales licenses to the existing tobacco retail licenses. As long as the wholesale companies and platforms are regulated, there will be no obstacles to sales.

 

Q: How do you see the development of disposable cigarettes in the future?

 

A: It is expected that disposable products do not have much room for growth in China. Disposable products (usually two or three hundred puffs, and a pack of cigarettes is estimated to be about the same) sell well in the United States, mainly because 1) the price is low, and 2) the taste is not good The domestic advantage is relatively small, so most of China's bombs are changed.