On April 1st, the "Honest Label" law officially went into effect in Russia. On April 11th, during a national Duma assembly, a comprehensive electronic cigarette regulation bill was passed after three readings. The bill includes a ban on flavored additives, online sales, and in-store displays of electronic cigarettes, as well as an increase in the minimum price of electronic cigarettes.
On April 14th, according to Russian media outlet 59.RU, some electronic cigarette retail stores in Perm have implemented modifications. Some businesses have used blinds to cover their electronic cigarette counters, while others have used dark glass display cases to hide the counters. 59.RU reports that this new series of electronic cigarette bans is unlikely to affect large businesses, but could force small businesses to exit the market.
Electronic cigarette display shelves covered with blinds | Image source: 59.RU
2FIRSTS conducted interviews with electronic cigarette dealers and industry professionals from multiple companies in China and Russia to understand their views on Russia's comprehensive e-cigarette regulatory policy and the state of the e-cigarette market in Russia.
As regulations become stricter, logistics companies operating in the gray area are considering entering the legitimate market.
In interviews with several Russian logistics companies, 2FIRSTS learned that the regulation of electronic cigarette logistics in Russia has become increasingly strict. Authorities are primarily checking whether the goods have "honest labels" or if there is any tax evasion. Logistics providers have stated that the delivery of gray market products requires careful timing.
The term "grey channel" refers to the practice of illegally bypassing certain customs procedures in international trade in order to avoid paying taxes or other fees on taxable goods. This can be achieved through various means, such as falsely reporting or concealing information about goods, or bribing customs officials to allow products to enter the country with reduced or no tax obligations.
A logistics company that primarily operates in the Grey Market has stated that they are considering a shift towards the White Market in order to secure long-term growth. As part of this strategy, they are exploring the regulations of the White Market and aiming to make this transition.
However, some practitioners express concerns about the Bai Guan market, stating that the prices are too high.
Some dealers only accept Bai Guan products.
Wang Juncheng, the general manager of Russian logistics company "Esooqing", informed 2FIRSTS that some distributors are now only accepting white-label products. The 2FIRSTS Moscow news center reached out to multiple distributors to confirm this information, and they all confirmed that they will no longer accept gray-label products.
In addition, Wang Juncheng revealed that clearance for Bai Guan products has become stricter. "Starting from April, Russian imported e-cigarettes require EAC certification for the tobacco oil products, while before April, only the e-cigarette itself needed to be submitted," said Wang. "If the tobacco oil products are not certified by EAC, there will be clearance issues.
Electronic cigarette shelf with dark glass display case | Image source: 59.RU
Electronic cigarette companies adopt a wait-and-see approach while remaining optimistic about compliance with regulations.
According to preliminary investigations by 2FIRSTS, the electronic cigarette market in Russia is currently experiencing three conditions under a series of regulatory policies. Large compliant distributors are holding back, while some large wholesalers are attempting to clear their inventory, and other distributors are stocking up on certain product categories. However, logistics companies have reported no significant increase in orders at the moment.
Russian media outlet 59.RU has reported that prices of disposable e-cigarette products in Russia are expected to increase. This comes after the government announced that it will set a minimum price, making it impossible to purchase e-cigarettes for a lower price anywhere in the country. Retailers have indicated that prices may increase by 200-250 rubles (equivalent to 17-21 RMB) depending on how suppliers choose to price their products.
Some domestic e-cigarette industry workers have said that Russia's minimum pricing policy is a good thing because the current prices of e-cigarettes in Russia are chaotic and disrupting the market.
Most interviewed electronic cigarette industry professionals maintain a relatively optimistic attitude towards regulatory policies - currently, there is no explicit order in Russia banning flavored electronic cigarettes or specifying the scope of additives, indicating that the Russian electronic cigarette market can continue to operate.
Retaining the market offers a chance for expansion, while effective regulatory measures can help Russia enlarge its trade with the Bai Guan market.
2FIRSTS will continue to monitor the developments of Russia's comprehensive electronic cigarette regulation policy. Stay tuned for updates.
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Expert analysis series:
Expert analysis 1: Russian flavor ban applies to all electronic cigarette products, specific additive standards to be disclosed.
Expert analysis 2: Russia sets minimum retail price for e-cigarette products to reduce demand for nicotine items.
Expert analysis 3: Russia proposes online ban and offline display ban on e-cigarettes, effective from June 1st.
Topic: Progress and Expert Analysis on the Russian E-Cigarette Flavor Ban (Click the image below to go to the article)
References:
The State Duma has banned the sale of "sweet" vapes. Many vaping shops in Perm have shared their thoughts on this decision and the business is making predictions about what the future holds.
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