On March 11, 2022, the State Tobacco Monopoly Administration （STMA）of China issued the "Administrative Measures for Electronic Cigarettes" (hereinafter referred to as the "Administrative Measures"), which will take effect on May 1, 2022. Among them, Article 26 stipulates that it is prohibited to sell flavored electronic cigarettes other than tobacco flavors and electronic cigarettes that can add atomizers by themselves.
From May 1, 2022, the management measures for China's electronic cigarette industry will be officially implemented, and the national standard for the electronic cigarette industry is also being formulated. In addition to prohibiting the sale of flavored e-cigarettes other than tobacco flavors and e-cigarettes that can add atomizers, the new regulations also clearly state that e-cigarette manufacturers, atomizer manufacturers, and nicotine manufacturers for e-cigarettes, etc., must be established by the State Council. Approved by the tobacco monopoly administrative department, obtained a tobacco monopoly production enterprise license, and approved and registered by the market supervision and management department; to engage in the retail business of electronic cigarettes, it shall apply to the tobacco monopoly administrative department in accordance with the law to obtain a tobacco monopoly retail license or change the scope of the license; Electronic cigarette products should meet the mandatory national standards for electronic cigarettes; the administrative department of tobacco monopoly of the State Council establishes a national unified electronic cigarette transaction management platform, and electronic cigarette product manufacturers and electronic cigarette brand holders that have obtained tobacco monopoly licenses in accordance with the law shall pass the The e-cigarette transaction management platform sells e-cigarette products to e-cigarette wholesale companies, etc. It can be seen from the above policies that the electronic cigarette industry will basically refer to traditional tobacco supervision in the future, and the era of strict supervision is coming. The industry believes that after the implementation of supervision, the state of low-threshold and disorderly development of the electronic cigarette industry in the past will be changed, and the industry will enter a period of benign development.
The policy has increased the protection of minors. Although the sale of e-cigarettes to minors has been explicitly prohibited before, and the top brands have also set up a comprehensive minor protection system, there are still some merchants who pursue interests to sell flavored e-cigarettes of various flavors to minors. After the new regulations, only tobacco-flavored electronic cigarettes can be sold on the market, and the various flavors of electronic cigarettes that are popular among young people are gone, which can reduce the number of non-smokers, especially young people, becoming smokers. However, the flavoring needs of adult e-cigarette users will also not be met, which may lead them to return to the cigarette camp.
The policy encourages exports while regulating China's domestic market. The electronic cigarette industry is one of the few industries in China that has an absolute leading edge. As the undisputed overlord of the global electronic cigarette industry, more than 90% of the world's electronic cigarettes are produced in China, and 87.3% of the public patents for electronic cigarettes also belong to China. In 2021, China's e-cigarette industry exports will be about 138.3 billion, a year-on-year increase of 180%. And there are now 82 million e-cigarette users in the world, with an annual growth rate of 20%.
It only took more than a month from the implementation of the new regulations. Shenzhen and Dongguan, the main producing areas of electronic cigarettes, were affected by the epidemic again, and their production capacity could not be fully utilized. In such a short period of time, it was necessary to digest inventory, develop new products, and change franchise stores There is a lot of work to be done, and it is considered an almost impossible task. In addition, after the new regulations, flavored electronic cigarettes, which account for more than 90% of the market share, will withdraw from the market. According to data from the China Electronic Cigarette Industry Committee, there are about 50,000 offline stores in China, and a total of 5.5 million people are employed in the upstream and downstream of the industry chain. . In the short term, if the implementation of supervision is promoted too quickly, it is necessary to consider the impact on employment and taxation in the short term.