The Negative Impact of Australia's Ban on E-Cigarettes

Over the past few years, the introduction of electronic cigarettes, or e-cigarettes, has caused a change in how consumers enjoy tobacco in Australia and globally.

While other countries have accepted this change and regulated new products, the Morrison government's response has been to prohibit the sale of such products in Australia, leading to a high-profit black market or forcing funds to flow out of the local economy and for consumers to lawfully purchase imported products overseas.

The CEO of the Australian Association of Convenience Stores (AACS), Theo Foukkare, has stated that a policy aimed at completely eradicating illegal tobacco and electronic cigarettes has had a negative impact on public health and the legal electronic cigarette industry.

The illegal sales of tobacco and nicotine e-cigarettes continue to add downward pressure to legal tobacco sales, resulting in related losses for tobacco consumers who are forced to purchase these products in bundles.

A recent report by KPMG on illicit tobacco has revealed that the current sales rate stands at 19.3%, representing an increase from 2.4% (16.9%) in 2020. Since the ban on nicotine-containing e-cigarettes was implemented in October 2021, the black market for these products has exploded.

The product is easily available in illegal retailers, claiming a significant portion of the valuable customer flow from legal retailers, consequently reducing overall shopping basket size and affecting all categories. However, tobacco sales are not impacted.

According to Foukkare, a recent study by Roy Morgan for AACS estimates that there are currently 1.1 million adult nicotine e-cigarette users in Australia, and that the illegal nicotine e-cigarette industry in Australia could be worth over $1.5 billion annually.

The entire industry is feeling the impact, with Pradeep Kumar, director of TabSol in Australia, stating that the prevalence of illicit tobacco and nicotine e-cigarettes is the biggest challenge currently facing the industry.

The widespread supply of illegal tobacco and nicotine e-cigarette products is having a significant impact on the entire industry. Due to a lack of enforcement and control at our borders, these products are flooding our streets at an alarming rate. The availability of nicotine e-cigarettes is easy, and both consumers and illegal traders see them as normal and acceptable.

The wholesale distributor TabSol of Tribal Spirit e-cigarettes always adheres to current legislation and ensures that they only distribute legal non-nicotine electronic cigarettes.

We have commissioned independent testing to ensure that our products do not contain nicotine or any prohibited chemicals. It is the lack of enforcement by authorities that affects and concerns all law-abiding businesses.

Kumar stated that unless authorities take strict action to control the illegal sale of nicotine e-cigarettes, legal suppliers like TabSol will be affected.

Due to the widespread availability of nicotine e-cigarettes, the distribution of our TSVo- tribal spirit e-cigarette (nicotine-free) has slowed down. The only legal alternative to nicotine e-cigarettes, nicotine-free e-cigarettes sales are also slowing down because of the flood of nicotine e-cigarettes.

保险之一 Property insurance is a key type of insurance.

Although the industry is currently facing challenges, property insurance and independent grocery channels remain crucial for many brands in this category.

Phoebe Tacon is the National Business Manager for P&C at Imperial Brands, which offers a product portfolio including JPS, Davidoff, and L&B. Tacon states that the combination of these two channels represents over 8,500 individual retail and multi-chain operators in Australia.

Most of these stores offer a wide range of tobacco products and accessories at competitive prices, along with high-quality customer service.

Shoppers have positively responded to independent and convenient category pricing, resulting in high trade shares. Independent grocery businesses have seen growth from 14.3% in 2019 to a high of 17.0% in 2022, while property and accident insurance have remained stable at 11.5%. This means that almost one third of tobacco sales in Australia are conducted through these channels.

Tacon believes that independent grocery channels will face challenges to their market share from tobacco merchants and grocery organization channels once they resume normal operations and shoppers return to their pre-Covid habits.

Imperial Brands is committed to collaborating with retailers to develop solutions that can drive foot traffic and category penetration in your store.

According to Kumar, P&C channel is TabSol's top priority channel, as compared to some other channels, convenience channels tend to have excessively high sales indices for tobacco and related products.

Tabsol offers high-quality tobacco and electronic cigarette products at a reasonable price, making convenience stores a focus for distribution. With numerous stores across the country and strong organizational abilities, the company facilitates easier transactions and improves the convenience channel.

What Will the Future Look Like?

Gary Dickson, the Regulatory and Legal Compliance Manager at Imperial Brands, acknowledges the company's role in minimizing the harm caused by combustible tobacco products. He recognizes society's concerns about the risks of smoking and therefore, the company is increasingly focused on nicotine replacements.

Imperial Brands Australasia is currently not marketing or selling any Next Generation Products (NGP) in Australia. We are committed to making a meaningful contribution to reducing the harm caused by tobacco, and our global product portfolio includes a range of NGPs, including vapor, heated tobacco, and oral nicotine products.

Many regulatory and public health agencies have concluded that NGPs, including e-cigarette products, are a less harmful alternative to smoking and play a positive role in reducing smoking-related illnesses. We encourage governments to recognize the potential risks reduction of NGPs and develop balanced regulatory and fiscal policies that support harm reduction from tobacco.

Foukkare stated that AACS is calling for a national summit to discuss the issues that have arisen since the introduction of the current prescription model policy by the Therapeutic Goods Administration (TGA). These issues include the need to design cost-effective enforcement measures, abolish the yet-to-be-implemented prescription plan for consumer access, and find ways to dismantle rogue groups fueling black market trade.

The AACS is urging the TGA to immediately impose age restrictions on the sale of all electronic cigarette products and implement a national licensing scheme for all retailers. Additionally, the AACS suggests that a national product responsibility tracking plan be established and that responsible retailers limit the sale of nicotine e-cigarette products within the scope of their licensing.

Kumar believes that the authorities' inaction has turned Australia into a safe haven for criminals engaged in illegal nicotine and tobacco trade.

Strict regulation of tobacco products and e-cigarettes has made illegal trade very profitable.

The inability of authorities to enforce regulations is fostering a culture that accepts illegal trade. Retailers, overwhelmed by the widespread availability of illicit tobacco and e-cigarette products, are succumbing to high demand and huge profits, and engaging in the illegal sale of cigarettes, tobacco, and e-cigarettes.

Dickson agrees with Foukkare's viewpoint that the current prescription model has failed and has not provided an effective transition pathway for adult smokers to move away from combustible cigarettes.

The emerging illicit market for e-cigarettes highlights the urgent need for more effective regulation to achieve a better balance, encourage adult smokers to use NGPs, and limit minors' access to nicotine products.

Products in illegal markets are completely unregulated, meaning there are no product standards and they are often sold to underage consumers. Legitimate manufacturers, retailers, and the government are deprived of potential legal income.