ELFBAR's CRISIS: How the Vape Titan Fell into a Siege of Compliance and Public Opinion

Statement:
1. This article is limited to the study of the global vapor industry and does not involve any recommendations for brands or products.
2. The scope of this article is limited to the business domain and does not involve any comments on regulatory policies or international politics.
3. The expressions and evaluations of overseas regulatory agencies and media cited in this article are for research purposes only and do not represent the views of 2FIRSTS. Readers should judge the objectivity and rationality of the materials cited.

ELFBAR's CRISIS

By 2FIRSTS

On March 26, 2024, the U.S. Food and Drug Administration (FDA) News Center announced that it had issued warning letters to 61 physical retailers to prohibit the sale of unauthorized e-cigarette products. These warning letters involved the sales of disposable e-cigarette brand ELFBAR/EB Design and Lava products. The news clearly stated that the reason for its warning letters was "appeal to youth"— "These warning letters are the result of FDA's continuous monitoring of multiple monitoring systems to identify products popular with young people or with youth appeal. The 2023 National Youth Tobacco Survey found that over 50% of young people chose the ELFBAR brand when using e-cigarettes; in 2023, ELFBAR's manufacturer began marketing the product under the name 'EB Design.'"

In fact, starting from the investigation of ELFBAR e-liquid exceeding the standard in the UK in early 2023, over the past year, the two major global markets— the United States and the United Kingdom— have launched a series of regulatory actions against ELFBAR and its main category of disposable e-cigarettes. Mainstream media reports and comments have been escalating. ELFBAR and its parent company Heaven Gifts seem to be caught in a "siege," and it's not a sudden occurrence but a long-term process that ferments and suddenly erupts.

2023 UK Regulation: Beginning of the End

Once the most e-cigarette-friendly market in the world, in early 2023, it erupted with strong regulatory public opinion against e-cigarettes, with the tipping point being the revelation that Heaven Gifts's ELFBAR and LOST MARY were involved in e-liquid volume exceeding the standard. Since then, ELFBAR, which has been advancing globally for three years, faces its biggest challenge not in the business segment but in compliance. The regulatory storm triggered by this has also started a countdown for the growth of disposable e-cigarettes and the relaxed policies of the UK market.

The beginning of the siege dates back to a year ago. In early February 2023, Heaven Gifts's ELFBAR and LOST MARY were suspected of e-liquid exceeding the standard in the UK, and many distributors temporarily removed ELFBAR products from their shelves, with Heaven Gifts recalling them.

The outbreak of public opinion was initiated by the British media Daily Mail. This media, founded in 1896, has a daily circulation of over 1.5 million, and its news website has a monthly visit volume of over 100 million. On February 6, 2023, the newspaper published an article titled "UK's top-selling vape is stripped from shelves over illegal level of nicotine: Company admits 'inadvertently' breaking the law after it emerges products exceed limit," reporting that ELFBAR brand e-cigarettes were removed from UK supermarkets due to exceeding the nicotine content by 50%.

The Daily Mail did a lot of work for this investigative report. Reporters purchased ELFBAR products from three major UK convenience stores— Sainsbury’s, Tesco, and Morrisons— and sent them for independent testing. After obtaining the exceeding test results, the Daily Mail notified the MHRA (Medicines and Healthcare products Regulatory Agency). It also interviewed MHRA, the three convenience stores, and ELFBAR.

Another noteworthy impact is that although the Daily Mail's report started with product quality violations, it also positioned ELFBAR on the stage of commercial morality, with the focus on attracting minors. For example, the description of ELFBAR products: "These devices have bright packaging and sweet flavors, including cola and cotton candy ice, which are popular with children." Also, through the perspective of experts: Professor Andrew Bush from Imperial College London's pediatrics stated that these findings are "absolutely shocking." This laid the groundwork for further public opinion fermentation in the future.

The Daily Mail's report attracted attention from all walks of life in the UK. Mark Oates, director of the consumer rights organization We Vape, said: The survey results about ELFBAR reported by the Daily Mail are deeply concerning. It is obviously a failure on multiple levels... When the behavior of the industry's major players seems to damage the reputation of beneficial things like e-cigarettes, it is incredibly frustrating...

For a while, the e-cigarette public opinion achieved "breaking the circle," upgrading from an industry hotspot to a focus of public opinion, and with publication of the UK, the most important global market, the public opinion storm began to spread globally.

ELFBAR and its parent company Heaven Gifts are the protagonists of this regulatory storm. Since then, compliance and public opinion have become the Sword of Damocles hanging over them, becoming the biggest challenge in Heaven Gifts's development, and also ending its three-year global advance. However, the impact of this regulatory storm is not limited to this.

Before this, the UK has always been the most e-cigarette-friendly country in the world, with the government viewing e-cigarettes as an effective substitute for traditional cigarettes, thereby alleviating public health and medical issues. The UK Department of Health's research on e-cigarette harm reduction has also become one of the main materials for major tobacco companies to "lobby" and "publicize" globally. But since the ELFBAR regulatory storm began in early 2023, the UK's legislative and law enforcement departments have started to pay attention to issues such as underage attraction, environmental protection, and illegal trade represented by disposable e-cigarettes. Policies have been accelerated since then.

In January 2024, GOV.UK (the UK government's official website) published a news article personally voiced by Prime Minister Sunak titled "Banning the Use of Disposable E-Cigarettes to Protect Children's Health." Subsequently, there have been calls for taxation on e-cigarettes in legislative circles.

Once the most e-cigarette-friendly market in the world, the UK completed a 180° turnaround in one year.

ELFBAR's Achilles' Heel: Attracting Minors, Advertising, Environmental Protection, Tax Evasion, and Illegal Trade

Disposable products have overturned the logic of e-cigarette development over the past 20 years. Their strong fast-moving consumer goods attributes have profoundly transformed the supply chain, channels, and consumption patterns, also bringing new challenges to global regulation. The most pressing issues include attracting minors, advertising, environmental protection, tax evasion, and illegal trade. As a representative of the global disposable product explosion, ELFBAR's compliance and public opinion crisis also stem from these aspects. It must be noted that due to the complexity of the global e-cigarette channel chain, these issues cannot be directly attributed to ELFBAR. But "if you want to wear a crown, you must bear its weight." As one of the biggest beneficiaries of the global disposable wave, ELFBAR needs to respond more to the real challenges and the voices of all parties.

Within about a year since the Daily Mail reported the ELFBAR e-liquid exceeding the standard, international public opinion has reported and commented on ELFBAR from dimensions such as product exceeding the standard, advertising, taste, packaging, attracting minors, environmental protection, tax evasion, and illegal trade, with attracting minors, environmental protection issues, tax evasion, and illegal trade being the most focused "targets" of the siege.

The American mainstream media New York Times followed the pace of the UK Daily Mail. On March 19, 2023, the New York Post reported that U.S. Senator Chuck Schumer called on the FDA to investigate a popular, China-made e-cigarette and be "ready to ban it from the market."

The article's title was "Colorful Chinese-made e-cigarette ELFBAR using influencers to appeal to kids, Schumer says." In his public statement to the FDA, Schumer said ELFBAR used flavors suitable for children such as rainbow candy, peach mango, cotton candy, and vanilla ice cream to attract them, and its packaging was colorful, thereby attracting young customers.

Schumer, a member of the Democratic Party at the time and a senior federal senator from New York, was the Majority Leader of the Senate at the time and had co-sponsored the Marijuana Opportunity Reinvestment and Expungement Act (CAOA) with two other senators.

Schumer believes that this e-cigarette's behavior of directly attracting children and adolescents through social media is evading U.S. advertising laws. One of the report's contents is quite spicy: Schumer's statement and the New York Times report both associate ELFBAR with JUUL. The latter was once the most well-known e-cigarette in the United States, which fell heavily from the throne due to advertising, attracting minors, and other issues, and was issued a marketing ban by the FDA. Schumer said ELFBAR might be worse than JUUL, which can be seen as implying ELFBAR's "destiny" of also being banned.

In fact, the "destiny" came soon. On May 17, 2023, the FDA issued an "Import Alert" (Import Alert 98-06), which will "detain without testing the importation of new tobacco products that have not been marketed." The companies involved mainly include the importers, manufacturers, and transporters of Heaven Gifts's ELFBAR and EBDESIGN brands. This means that U.S. customs can directly detain ELFBAR's products, preventing them from entering the U.S. market—Heaven Gifts had stated that they were trying to get products approved by the FDA's PMTA process through normal application procedures. In response to this decision by the FDA, Heaven Gifts expressed dissatisfaction and disappointment through 2FIRSTS.

Just a week later, on June 22, the FDA announced that it had sent warning letters to 189 retailers, requiring them to stop selling unauthorized tobacco products, especially ELFBAR and EscoBars products. Both of these brands are disposable e-cigarettes, known for flavors that attract young people, including bubblegum and cotton candy.

The concept of bubblegum and cotton candy flavors, which appeared in the UK Daily Mail's report, reappeared in the FDA's news. In addition to such vivid flavor concepts, the FDA also more rigorously cited two sets of research materials: one is "ELFBAR is the top disposable e-cigarette brand reported by people aged 16 to 19 in the United States." The other is "In the past year, U.S. poison centers have reported thousands of e-cigarette exposure cases, most of which are children under 5. In the limited number of brand information cases reported from April 2022 to March 2023, ELFBAR was cited more times than the total of all other brands, and almost all ELFBAR cases occurred in children under 5." This has established a strong association between the ELFBAR brand and the harm to minors in the public mind.

Less than a week later, on June 28, the Associated Press published an article titled "Thousands of unauthorized vapes are pouring into the US despite the FDA crackdown on fruity flavors," which also focused on the ELFBAR brand. The article mentioned "FDA's import ban on ELFBAR shows the weaknesses of the agency's enforcement methods, and its related brands LOST MARY, Funky Republic were not on the warning list" in a critical tone towards the FDA.

At the same time as the regulatory actions and public opinion fermentation in the United States, the UK also erupted in public opinion on ELFBAR in the dimension of advertising after the e-liquid content exceeded the standard. On May 10, the UK Advertising Standards Authority (ASA) banned ELFBAR and HQD from promoting on TikTok.

In July and August 2023, ELFBAR's "e-cigarette recycling" themed advertisements appeared on buses and digital billboards in London. After receiving 10 complaints from groups such as the campaign group Adfree Cities and tobacco company Imperial Tobacco, the ASA banned ELFBAR's advertisement in November. ELFBAR publicly stated to 2FIRSTS that it respected the ASA's decision and promised to have taken measures to strengthen self-restraint in advertising and marketing. At the same time, ELFBAR expressed disappointment with any confusion that the advertisement might have caused.

The ASA ruled that these advertisements gave people an inaccurate impression of environmental benefits and their limited recycling options, and thus banned the related promotional posters. In fact, using public welfare advertisements to achieve brand communication is a "meme" that traditional cigarettes played out in the last century, and in many countries, the advertising regulatory field has long had mature prohibitive regulatory conclusions. For ELFBAR, which is still in negative public opinion in the UK, choosing such a model and timing for advertising is not a wise strategy. This public opinion has been reported by many local media in the UK, once again reflecting that the e-cigarette public opinion represented by ELFBAR has generalized to the entire social public opinion level.

Fueling Illegal Trade in U.S. Market?

The U.S. is the world's largest e-cigarette market and also a "hotspot" for illegal trade. As the most influential e-cigarette brand in the U.S. market, ELFBAR's weight and impact on illegal trade are worth paying attention to.

A month before the warning letter issued on March 26, 2024, the FDA had announced that it had filed civil money penalty complaints (CMPs) against 20 physical retailers for selling unauthorized ELFBAR e-cigarette brands. The FDA had previously issued warning letters to each retailer involved in selling unauthorized e-cigarette products. However, subsequent inspections found that these retailers failed to correct their violations, and the FDA is seeking the maximum fine of $20,678 for each individual violation by each retailer. Channel merchants selling ELFBAR in the United States will also face fines. Including the "announcement" that day, the FDA has filed CMP complaints against more than 100 retailers, accusing them of illegally selling ELFBAR e-cigarette products.

In response to the FDA's continued crackdown on illegal trade, ELFBAR told 2FIRSTS that since February 2023, Heaven Gifts has stopped selling ELFBAR products in the U.S. According to market feedback, the existing ELFBAR products on the U.S. market are not produced by Heaven Gifts. They come from VPR (an American company with a trademark dispute with ELFBAR) or counterfeit workshops in Southeast Asia.

This similar statement has also appeared in reports by the Associated Press. Heaven Gifts spokesperson Jacques Xiang Li said that the company stopped shipping ELFBAR to the U.S. earlier this year and tried to comply with regulatory agency regulations. Jacques Xiang Li said: "All ELFBAR brand products you see in the U.S. are counterfeit, I am very sure of this." He added that he has only worked at Heaven Gifts for three months and is still getting to know its business.

For this seemingly "Rashomon" topic, people in various fields have different views. Some related persons mentioned that in the continuous high-pressure crackdown on illegal e-cigarette production in China, counterfeit ELFBAR manufacturing black factories have been seized.

Comparing the data of China's export of e-cigarettes to the U.S. and the U.S. import of e-cigarettes from China can corroborate this from the side. In 2023, Chinese customs data showed that the total weight of e-cigarettes (including e-liquid) exported from China to the U.S. was 58,554.95 tons, with an export amount of 2.332 billion U.S. dollars; while in 2023, the U.S. International Trade Commission data showed that the total weight of e-cigarettes imported from China by the U.S. was 2,090.13 tons, with an import amount of 38 million U.S. dollars. In terms of weight, the U.S. import data accounts for only 3.57% of China's export data, and in terms of amount, it is even lower, about 1.63%. The huge data difference of more than 95% between China and the U.S., apart from statistics and cycle, etc., the gray area of illegal trade is the highest possibility associated with data anomalies.

E-Cigarette Public Opinion: From "Business Ethics" to "Pan-Politicization" 

As Western mainstream media report on the e-cigarette issues represented by ELFBAR, they gradually "pan-politicize" commercial issues towards moral and political dimensions. This change will not only affect the development of the e-cigarette industry but also likely become a "variable" in the complex international situation, which deserves serious attention.

Half a year after the "import warning" issued on May 17, 2023, the FDA's substantive law enforcement actions began. In December 2023, U.S. authorities publicly announced for the first time the seizure of Heaven Gifts products in a confiscation action. Among the 1.4 million illegal e-cigarettes worth 18 million U.S. dollars from China, a large number of ELFBAR products were included. The mainstream media Reuters and the Associated Press carried out news reports in line with the FDA's law enforcement action against ELFBAR.

The two media outlets published in-depth investigative articles on the FDA's enforcement of ELFBAR on December 14 and December 19, respectively. Reuters' news title was "China e-cigarette titan behind 'ELFBAR' floods the US with illegal vapes," while the Associated Press title was "ELFBAR and other e-cigarette makers dodged US customs and taxes after China’s ban on vaping flavors."

During the same public opinion outbreak period, the UK's Sunday Times published an article titled "The ELFBAR billionaire who made a fortune on bubblegum vapes" on December 14. Unlike the focus on "illegal trade" by American media, the authoritative British media chose a more specific and image-rich target, ELFBAR founder Zhang Shengwei, focusing more on business ethics. The term "bubblegum" in the title is the third high-influence appearance in the year's public opinion siege.

By the end of 2023, public opinion has been severe for ELFBAR. The voices of international mainstream media giants such as Reuters, the Associated Press, and the Sunday Times have further pushed ELFBAR to the forefront. These media reports on the e-cigarette issues represented by ELFBAR are not only "whistling" to the Western public but also introducing the words "Made in China" and "Chinese exports" into the public opinion, promoting the "pan-politicization" of commercial public opinion. This approach is quite lethal:

• Legal: Defining ELFBAR's problem as illegal trade and pointing out specific operational details such as "customs fraud" and "tax evasion," which are defined as "illegal" and far exceed the "violation" nature of the UK's content exceeding the standard at the beginning of the year;
• Moral: Repeatedly emphasizing the harm of ELFBAR to minors;
• Politicization of e-cigarette issues: Mentioning that after China's e-cigarette regulatory policy banned flavors, companies violated regulations in other countries;
• Exposure of gray chain: Researching its specific operational modes of customs fraud and tax evasion, describing ELFBAR's company as a speculator skilled in "cat and mouse games";
• Exposure of "mask" strategy: Pointing out that in addition to ELFBAR, Heaven Gifts uses a multi-brand strategy to evade regulation, and also mentions its multi-company operation strategy.

The above expressions and narrative methods may win "hits" in Western society under the current special international political and trade atmosphere. However, pan-politicizing this commercial issue may lead to radicalization in problem-solving, and the benign development of the industry will be more difficult.

ELFBAR's Counter-Siege

The commercial king suddenly encountered challenges in compliance and public opinion, from being at a loss to gradually forming a method, ELFBAR took a year.

Facing the "siege" of compliance and public opinion, ELFBAR's parent company Heaven Gifts has taken the following actions.

Defense: In response to the UK e-liquid exceeding the standard incident, ELFBAR spokesperson first mentioned that "ELFBAR initially doubted the testing process of the Daily Mail and said that these products might be counterfeit." This attitude of trying to use "fake goods" as an excuse shows to some extent that many e-cigarette companies, including ELFBAR, are not professional enough in international public relations and public opinion outbreaks, and have a fluke mentality.

Apology: As the facts of the UK e-liquid exceeding the standard incident gradually became clear. ELFBAR admitted its actions. A spokesperson said: "We found that some ELFBAR products in the UK have been overfilled." And the reason for the violation was stated as: "It seems that the e-cigarette e-liquid tank size is the standard size for other markets (such as the United States), and it was inadvertently installed in some of our UK products. We apologize for any inconvenience caused." The word "inadvertently" in the spokesperson's statement was also used in the media report's title, but with quotation marks, and the article's introduction mentioned: They "wholeheartedly apologized" (they "sincerely" apologized). The quotation marks were also added.

Counterattack: After the UK e-liquid exceeding the standard incident, Heaven Gifts told 2FIRSTS that the source of the incident was British American Tobacco (BAT), because the company "had previously proposed to acquire the ELFBAR brand." Some industry observers believe that this incident may be BAT's counterattack after its acquisition wish was rejected by Heaven Gifts, but this claim has not been confirmed by BAT.

Continued Public Relations: Since the beginning of 2023, Heaven Gifts has increased its investment in public relations. On March 20, 2024, Heaven Gifts released a "White Paper on Climate Change Response." With 2022 as the base year, the white paper completed the carbon footprinting of the company's entire value chain business activities for the first time and committed to achieving operational carbon neutrality by 2035 and net-zero emissions for the value chain by 2050.

As early as December 2022, ELFBAR established Lighthouse, the "Lighthouse Guardian Program." According to its official statement, the action aims to take on the responsibility of protecting minors and advocate that minors should not come into contact with, purchase, or use electronic vaporization products.

It is worth noting that the case of the "e-cigarette recycling" themed advertisements that appeared on buses and digital billboards in London in July and August 2023 can also be seen as an attempt to promote public relations through environmental protection, but the final result of being banned by the ASA shows that Heaven Gifts needs to spend more time mastering public relations capabilities. After all, other international tobacco companies have accumulated more than half a century of experience in this area.

Postscript

The development of the vapor industry has led to the emergence of global brands such as ELFBAR, VUSE, and RELX, as well as a global regulatory storm and public opinion. These phenomena also mark the gradual transition of the global vapor industry from the "small workshop" and "small brand" stage to modern commerce. In the early stages of new commerce, development is often faster than regulation. This is determined by the uncertainty of innovation. Therefore, the short-term "chaos" should not negate the innovation of new commerce; what needs to be addressed are the problems in the process of commercial innovation development, not commercial innovation itself. In discussing the compliance crisis and public opinion risks of the vapor industry, ELFBAR is an unavoidable topic, but attributing all problems to ELFBAR would also be unfair, and pan-politicizing the e-cigarette issue should be vigilant and opposed. On issues related to public health and the future, all parties should be sincere and responsible.

(Charlotte Yu and Leona Zhu have both contributed to this article)