Securities Times: Global E-Cigarette Legislation Is Strengthening

In early September, e-cigarette giant JUUL agreed to pay at least $439 million to settle with more than 30 U.S. states. The company, which has suffered from regulation, has seen its valuation go down to a fraction of a percent in recent years. From a global perspective, the tightening of e-cigarette regulation has become a commonality, which also makes the days of Chinese e-cigarette companies feel pressure.

JUUL has been investigated in recent years, the company's pioneering invention of nicotine salts, and used in electronic cigarettes small cigarettes, so that electronic cigarettes small cigarettes soon replaced large cigarettes, occupying the mainstream of the market. At the end of 2018, Altria Group to 12.8 billion U.S. dollars to buy a 35% stake in JUUL, JUUL valuation soared to 38 billion U.S. dollars.

But the U.S. side began to suppress e-cigarettes in the Trump era, announcing a series of policies that are not friendly to e-cigarettes, including a ban on all menthol and fruit flavored atomized e-cigarettes announced in 2020, and requiring e-cigarette companies to conduct PMTA (tobacco product market access application) audits before listing their products, an audit that is expensive and does not pass many.

According to the "2021 Electronic Cigarette Industry Blue Book" data, the top three destination countries or regions for China's electronic cigarette exports are the United States, the European Union and the United Kingdom, and Russia, accounting for 53%, 22%, and 9%, respectively.

This shows that the U.S. market is crucial, accounting for more than half of the global market. The 2022 Electronic Cigarette Industry Export Blue Book shows that the global e-cigarette market size will exceed $108 billion in 2022, and China's total e-cigarette exports will reach 186.7 billion RMB, a growth rate of about 35%.

In the case of such strict control, why is the U.S. market is still growing? The main reason for this is that the U.S. states have a lot of power, the order to ban menthol and fruit flavored atomized e-cigarettes did not fall into place, only a few places to implement, a variety of flavors of electronic cigarettes are still on sale, pulling the global electronic cigarette sales growth. The U.S. market is still the main position of Chinese e-cigarette exports.

And JUUL, which is mainly sold in the United States, has gradually fallen off in the past few years, mainly because it faced a series of investigations and was accused of luring teenagers to smoke e-cigarettes. at the end of July, it was reported that Altria Group further lowered the valuation of its stake in the e-cigarette company JUUL to $450 million, after about three and a half years, JUUL's valuation shrunk by 96.48%.

Settlement agreements between JUUL and more than 30 U.S. states indicate that no one under the age of 35 may be portrayed in marketing, film and television placements, billboards and social media ads, no JUUL-branded merchandise may be sold, and no educational programs in schools may be funded.

Regulation and compliance are a matter of survival for e-cigarette companies and could reshuffle the industry, with JUUL falling out of this round of regulation.

The vast majority of the world's e-cigarettes are produced in Shenzhen, China, and China is increasing its e-cigarette regulation, with comprehensive control from production to channels, and no flavored e-cigarettes are allowed to be sold. Chinese e-cigarette companies are being incorporated into the management of a critical period.

In May this year, Hong Kong has completely banned the sale, manufacture, import or promotion of e-cigarettes and heated tobacco products. Even transit has been banned, which also makes Shenzhen e-cigarette companies very uncomfortable, after 40% of the volume of goods are shipped from Shenzhen to Hong Kong, and then sent to the world.

It is understood that more than 50 countries and regions around the world have included e-cigarettes in the control of tobacco products, and more than 40 countries strictly prohibit the sale of e-cigarettes.

Only a few countries continue to be friendly to e-cigarettes, such as the United Kingdom, 2021, the British National Health Service announced that the e-cigarettes into the health insurance, so as to help smokers to quit smoking.

The electronic cigarette industry from the pioneering era, to the "compliance" era, in compliance with the requirements of the enterprise's primary goal is not development, but survival, the way to survive is not to touch the regulatory high pressure red line