In early September, electronic cigarette giant JUUL agreed to pay at least $439 million to settle with over 30 US states. The company has faced significant regulatory challenges and its market valuation has plummeted in recent years. Globally, stricter regulations on electronic cigarettes have become the norm, putting pressure on Chinese electronic cigarette companies as well.
In recent years, JUUL has come under scrutiny. The company pioneered the use of nicotine salts in its e-cigarettes, which quickly replaced traditional cigarettes and dominated the market. At the end of 2018, Altria purchased a 35% stake in JUUL for $12.8 billion, boosting its valuation to $38 billion.
During the Trump era, the United States began cracking down on e-cigarettes and announced several policies unfavorable to the industry. In 2020, the U.S. government banned all mint and fruit-flavored vapes and required e-cigarette companies to undergo a PMTA (Pre-Market Tobacco Product Application) review before marketing their products. This review process is expensive and has a low success rate.
According to the 2021 E-cigarette Industry Blue Book, data shows that the top three countries or regions for China's e-cigarette exports are the United States, the European Union and the United Kingdom, and Russia, accounting for 53%, 22%, and 9%, respectively.
This indicates that the US market is crucial, accounting for over half of the global market. According to the "2022 Blue Book of E-cigarette Industry Exports," the global e-cigarette market is expected to exceed $108 billion in 2022, and China's e-cigarette exports will reach RMB 186.7 billion, with a growth rate of around 35%.
Despite tight regulation, why is the US vaping market still growing? This is mainly due to the significant power each state holds in America, where the ban on menthol and fruit-flavored vape has not been fully enforced and is only implemented in a few areas. Consequently, various flavors of e-cigarettes continue to be sold, propelling global e-cigarette sales growth. The US market remains the primary export destination for Chinese electronic cigarettes.
Over the past few years, JUUL, primarily focused on sales in the United States, has gradually fallen behind due to a series of investigations and allegations that the company has been enticing minors to use e-cigarettes. In late July, it was reported that Altria further reduced its stake in JUUL, valuing the company at $450 million, a decrease of 96.48% in just over three and a half years.
According to the settlement agreement between JUUL and over 30 states in the US, the company is not allowed to depict individuals under the age of 35 in their marketing, product placements in films or TV shows, billboards, or social media advertising. They are also prohibited from selling JUUL-branded merchandise and sponsoring educational programs in schools.
Regulation and compliance are crucial for e-cigarette companies, as they determine their survival and could lead to a reshuffling of the industry. JUUL has fallen behind in this round of regulation.
The majority of electronic cigarettes worldwide are produced in Shenzhen, China. The Chinese government is increasing its regulation of electronic cigarettes, implementing comprehensive control measures from production to distribution and prohibiting the sale of flavored e-cigarettes. Chinese e-cigarette companies are entering a critical period of management integration.
In May of this year, Hong Kong implemented a total ban on the sale, manufacture, importation, and promotion of electronic cigarettes and heated tobacco products. Even transit through Hong Kong is prohibited, which has caused discomfort for e-cigarette companies in Shenzhen. Previously, 40% of their shipments were sent from Shenzhen to Hong Kong before being distributed globally.
It is reported that currently over 50 countries and regions worldwide have included electronic cigarettes in their tobacco product regulation scope, and over 40 countries ban the sale of electronic cigarettes.
Only a few countries are consistently favorable towards electronic cigarettes, such as the UK. In 2021, the UK National Health Service announced the inclusion of electronic cigarettes in their healthcare coverage as a means to assist smokers in quitting.
The e-cigarette industry has shifted from its pioneering days to a "compliant" era. Under compliance requirements, the primary goal for companies is not growth, but survival. The key to survival is to avoid crossing the regulatory red line.
This article excerpts or reprints content from third-party sources. The copyright belongs to the original media and author. If there is any infringement, please contact us to delete it. Any institution or individual who wants to reprint the content must contact the author and should not directly reprint it.
This document has been generated through artificial intelligence translation and is provided solely for the purposes of industry discourse and learning. Please note that the intellectual property rights of the content belong to the original media source or author. Owing to certain limitations in the translation process, there may be discrepancies between the translated text and the original content. We recommend referring to the original source for complete accuracy. In case of any inaccuracies, we invite you to reach out to us with corrections. If you believe any content has infringed upon your rights, please contact us immediately for its removal.
