Category: Markets

Report Explores China’s Tobacco-Heating Market

Photo: David Mark from Pixabay
Research and Markets has published a new report on the world’s largest potential market for heat-not-burn (HnB) products—China.
The report provides an overview of China National Tobacco Corp. (CNTC) subsidiaries’ HnB marketing activities from 2017 to 2020.
The report reviews all HnB products that were officially released in domestic and foreign markets as well as cooperation ties in the Chinese HnB market.
China Tobacco has a market of 300 million smokers with a significant part being active HnB users. The domestic HnB sector is dominated by CNTC. It has launched HnB products in Sichuan, Yunnan, Guangdong, Anhui, Hubei, Heilongjiang and other provinces and has been actively engaged in overseas markets. CNTC HnB brands are presented in many foreign markets, mostly in Asian countries and eastern Europe.
Most HnB devices are promoted with dedicated consumables. HnB devices are either produced at facilities of CNTC subsidiaries or are OEM versions developed by third-party manufacturers. The CNTC subsidiaries with the largest number of HnB devices in the domestic market are based in Sichuan, Yunnan and Guangdong.
The report includes a brief review of HnB electronic devices produced in cooperation with major Chinese hardware manufacturers. There is also a brief description of companies engaged in the Chinese HnB market, and a complete list of HnB products with release dates and corresponding references in domestic and foreign markets, a map of presence of CNTC HnB brands in foreign markets and a timeline of CNTC HnB products by release date.
April 21, 2021
Global Tobacco Market to Reach $1.1 Trillion

Photo: Igor Akimov | Dreamstime.com
Amid the Covid-19 crisis, the global market for tobacco estimated at $845.1 billion in the year 2020 is projected to reach a revised value of $1.1 trillion by 2027, according to a new report published by Research and Markets. This translates into a compound annual growth rate (CAGR) of 3.2 percent.
Cigarettes are projected to record a 3.1 percent CAGR and reach $734.4 billion by 2027. After an early analysis of the business implications of the pandemic and its induced economic crisis, growth in the smokeless segment is readjusted to a revised 3.1 percent CAGR for the next seven years.
The U.S. tobacco market is estimated at $228.8 billion in the year 2020. China, the world’s second-largest economy, is forecast to reach a projected market size of $203.5 billion by the year 2027, trailing a CAGR of 5 percent over the analysis period.
Among the other noteworthy markets are Japan and Canada, forecast to grow at 2 percent and 2.5 percent, respectively, over the 2020–2027 period. Germany is forecast to grow at approximately 2.4 percent CAGR.

In the cigars and cigarillos segment, Canada, Japan, China, Europe and the U.S. will drive the 3.1 percent CAGR estimated for this segment. These markets accounting for a combined value of $57.2 billion in the year 2020 will reach a projected size of $70.8 billion by the close of the analysis period. China will remain among the fastest growing markets in this cluster.
Led by countries such as Australia, India and South Korea, the market in Asia-Pacific is forecast to reach $135.1 billion by the year 2027 while Latin America will expand at a 3.5 percent CAGR through the analysis period.
April 9, 2021
China Rising

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China’s vapor market has been growing rapidly from a small base. How it will evolve from here depends largely on the government.
By Timothy S. Donahue
There are 350 million smokers in China. The country consumes an estimated 1 trillion cigarettes per year. As the largest cigarette market in the world, it would make sense for China to embrace vapor products as a less risky alternative to combustible tobacco. However, with a state-run tobacco monopoly and billions of dollars of taxes at stake, industry experts say the Chinese vapor market is complicated and slow to implement regulations.
Despite impressive growth, China’s vapor market is still insignificant compared to its tobacco market. As of the end of 2019, an estimated 7.4 million people in China were regular e-cigarette users, according to Cloris Li, a spokesperson for Smoore International, parent to FEELM and the Vaporesso brand. “That means the electronic cigarette industry in China can still potentially convert a large number of smokers,” said Li. “Considering China’s status as the biggest tobacco market, it has enormous potential to continue the current rapid growth rate. In 2018, Chinese e-cigarettes and auxiliary products had a market size of CNY5.52 billion [$848.38 million] and it is predicted to grow more than double to CNY11.28 billion by 2022.”
Vaping products in China are not considered tobacco products like they are in Europe and the United States. Instead, e-cigarettes are considered a consumer goods product. During the E-Vapor and Tobacco Law Virtual Symposium, sponsored by the law firm of Keller and Heckman, two industry experts discussed the current vaping and tobacco market in China. One speaker noted that because e-cigarettes do not fall under the definition of tobacco, as defined under the country’s monopoly laws, China has yet to implement any major restrictions on vapor products.

China, where the modern e-cigarette was invented, has become the manufacturing hub of the fast-growing global vapor industry. (Photo: Timothy Donahue)
“When looking at the regulation as it relates to e-cigarettes in China, we are seeing what I would classify as slow development,” the speaker said. “On a national level, [there are] no mandatory laws or regulations as it relates to e-cigarettes[-related] or e-tobacco-related products. That may change at some point; we don’t know. But what we do know is that it does not fall under the definition of tobacco at the present time.”
With little regulatory guidance, China’s vapor market has been booming both in terms of domestic consumption and manufacturing exports. China, where the modern e-cigarette was invented, has become the manufacturing hub of the fast-growing global vapor industry. This has led to the rise of several major corporations, including the world’s most valuable vapor company, Smoore International. When Smoore went public in mid-2020, its stock grew by nearly 150 percent on its opening day of trading on the Hong Kong Exchange.
The value of Chinese e-cigarette maker RLX Technology, parent to the RELX brand, jumped 146 percent during its trading debut in January 2021 after raising $1.4 billion in its U.S. initial public offering, the first major U.S. listing this year by a China-based company. In its prospectus, RLX stated that vaping products only have a 1.2 percent penetration rate in China compared with 32.4 percent in the U.S. The Electronic Cigarette Industry Committee estimated China’s 2020 e-cigarette sales at CNY14.5 billion, an increase of 30 percent from 2019 (CNY11.2 billion). By comparison, the U.S. e-cigarette market in 2019 was worth $5.34 billion and is expected to reach $6.50 billion in 2020, according to Grandview Research.

When Smoore International went public on the Hong Kong Exchange in mid-2020, its stock grew by nearly 150 percent on the first trading day. (Photo: Smoore International)
RLX is doing its part to accelerate e-cigarette sales in China. In early 2020, the company launched its two flagship RELX vape shops in Shanghai and Beijing. Today, RELX has partnered with 110 authorized distributors to supply its products to over 5,000 RELX-branded partner stores and over 100,000 other retail outlets nationwide, covering over 250 cities in China, according to its prospectus. Revenue for the company nearly doubled in the nine months ended Sept. 30, 2020 to $324 million, with a net income of $16 million.
Along with the Smoore and RLX IPOs, China’s vaping industry continues to attract lots of attention from the capital market, according to Li. “This year, in 2021, many more second-tier brands are spearheading efforts to acquire financing to expand the market [in China], especially markets in lower-tier cities,” Li said. “For example, MOTI intends to invest CNY1 billion to open 10,000 stores. Snow Plus even announced its intent to distribute future stock shares to distributors to open more stores.”
To date, the Chinese government has passed two major pieces of legislation for vapor products. In 2018, it made it a crime to sell a vapor product to anyone under 18 years of age. In November 2019, the government prohibited online sales of vapor products to prevent youth initiation. In 2020, the country passed the Law of the People’s Republic of China on the Protection of Minors. That law is aimed at preventing parents or other guardians from “indulging or instigating minors” to smoke or vape.

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The Chinese government wants to avoid the rapid rise in youth vaping that occurred in the U.S. If the U.S. figures replicated domestically in China, it could harden Beijing’s stand on the category, according to a 2021 report from ECigIntelligence. For now, e-cig usage among Chinese youth remains relatively low. A 2019 survey by the Chinese Center for Disease Control and Prevention found that 8.6 percent of high school students aged between 15 years and 18 years in China had used “tobacco” products during the previous 12 months.
Between July and August 2020, authorities collected comments on a bill that would restrict the public use of e-cigarettes nationwide and establish specific areas where vaping would be allowed. “The amendments to the Law on the Protection of Minors would prohibit vape stores from operating near schools, ban e-cigarette sales to minors and vaping in schools, kindergartens and anywhere else where young people are gathered,” the report states. “The bill would also require vendors to ask for an identification document if in doubt about a purchaser’s age while shop owners would be required to put up a prominent ‘no sales to minors’ sign. If the proposals are adopted and e-cigarettes are regulated under the same umbrella as traditional tobacco products, it would be China’s first national law specifically restricting e-cigarettes.”
In 2020, the Chinese government also floated the idea of banning vapor products completely. Another proposal suggested that e-cigarettes should be regulated as tobacco products while prohibiting their promotion as smoking cessation products. While the government has not indicated it will act on any of these proposals, the discussions send a clear message to the industry that politicians are willing to step up and regulate e-cigarettes, according to the report.

With online sales banned, vapor companies have been investing in brick-and-morter outlets.
The authors point out that Chinese rules can impact a market virtually overnight. Prior to the country’s ban of online sales of vapor products, there were hundreds of thousands of products available on the internet. The day after the announcement, an online search for e-cigarettes would have yielded zero results. “When the authorities do put something in writing and announce something that they want to put into effect, it can happen oftentimes almost immediately,” the report states.
While the Chinese government is yet to release any vapor regulations concerning components and manufacturing, several industry players have come together to self-regulate the industry. In 2017, draft regulation or standards were developed on the industry level. While not mandatory national standards, the rules give a good sense of what the industry considers sensible in terms of specifications, requirements and limitations.
“The same holds true with the group standards concerning the raw materials, about the diluents, the flavorings, and some requirements as it relates to physical, chemical, hazardous substances. They go into some test methods,” a presenter at the Keller and Heckman seminar said. “Not always, but typically, the authorities will look at these group standards, voluntary standards, and start to adopt some of that language when they make mandatory national standards. So, having a good sense of what these [recommended standards] look like … that would be important.”
Further complicating China’s vapor market is the China National Tobacco Company (CNTC), the state-run tobacco monopoly. If the monopoly chooses to enter the vapor market, it could devastate the independent vape shops that proliferate the Chinese market. “The state monopoly has yet to signal clearly how it will regulate e-cigarettes or whether it will sell them. If it does, it has the power to regulate its competitors out of the market,” the report states. The industry is acutely aware of this risk. In a November 2019 interview with Reuters, one investor in a Chinese e-cigarette start-up compared the combined regulatory and competitive threat posed by CNTC as “a knife on the neck.”
CNTC is a source of major funding for the Chinese government. Its contribution accounted for an estimated 5.45 percent of the country’s tax revenue in 2018. That amounts to CNY10.8 trillion, according to media reports. If CNTC were to enter the vapor market, the monopoly’s existing 5 million domestic retail outlets could present a major challenge for private vape shop owners.
Kate Wang, CEO for RELX, told Reuters that she’s “not worried” about the government’s impact on the sector. The products will continue to remain available, she said, “as long as there’s proof that this is a good solution for smokers.”
Market overhaul: China seeks to regulate ENDS like tobacco
It has long been anticipated that the tobacco monopoly in China would one day regulate electronic nicotine-delivery systems (ENDS). At press time, China’s Ministry of Industry and Information Technology (MIIT) and the State Tobacco Monopoly Administration (STMA) released a draft proposal to overhaul rules governing the ENDS market.
Shares in RLX Technology, parent to China’s market-leading RELX e-cigarette brand, plunged in the wake of the announcement. Just two months after the vapor maker’s billion-dollar debut on the New York Stock Exchange, RLX shares fell by more nearly 45 percent to $10.69 per share on March 22, having reached a high of $19.46 per share on March 19.
An online copy of the draft regulations suggests the government intends to regulate ENDS like ordinary cigarettes. The ministry is seeking public comments on the draft regulations until April 22. The implications of the draft regulations could be far-reaching. With an estimated 300 million smokers, China is the world’s largest potential market for vapor products.
“In view of the homogeneity of new tobacco products such as e-cigarettes and traditional cigarettes in terms of core ingredients, product functions and consumption patterns, new tobacco products such as e-cigarettes shall be implemented in accordance with the relevant provisions of the Regulations on Cigarettes,” the draft proposal states. “The implementation … will greatly enhance the effectiveness of e-cigarette supervision, effectively regulate e-cigarette production and operation activities, solve the product quality and safety risks of e-cigarettes, false advertising and other issues, and effectively protect the legitimate rights and interests of consumers.”
While the news will have some impact on the global ENDS market, the Chinese manufacturers producing for international markets will likely continue operations. “Depending on how they regulate and to what extremes, it could be devastating to the companies operating in the consumer market in China,” said a representative of a major China-based ENDS manufacturing company who asked for anonymity. “We expect that there will be players that remain in the market, possibly working alongside the Chinese government in the promotion and sales of vaping products. Right now, we are just waiting for a better understanding of what this means for China’s domestic market. A worst-case scenario would be an outright ban on all products, but this is unlikely.”—T.S.D.
Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

April 1, 2021
JTI to Upgrade its Romanian Factory

Photo: gavia26210 from Pixabay
Japan Tobacco International (JTI) will invest €60 million ($70.43 million) to upgrade the production capacities of its factory in Romania, reports SeeNews.
The investment program will be deployed over the next three years, increasing the volume of JTI cigarettes manufactured in Romania.
The factory located in Bucharest’s Pipera industrial area is expected to play a key role in JTI’s sourcing to the EU markets.
“JTI Manufacturing will be provided with cutting-edge equipment in terms of technology and production standards,” JTI Romania factory lead Jamie Dunlop said.
Romania is the third-largest cigarette manufacturer in Europe after Germany and Poland. At present, some 70 percent of JTI Manufacturing Romania’s production is exported to some 50 countries.
According to the National Institute of Statistics, in 2020, exports totaled over €1.3 billion.
JTI Manufacturing will be provided with cutting-edge equipment in terms of technology and production standards.
Jamie Dunlop, JTI Romania factory lead
Currently, JTI employs more than 1,200 people in Romania, including 500 at the Bucharest factory.
The company’s two entities in Romania—manufacturing and trading—paid over RON4.77 billion ($1.14 billion) in excise, VAT and other taxes, duties and contributions to the Romanian state in 2020, up 12 percent from the previous year.
JTI started operating in Romania in 1993 as R.J. Reynolds International and was one of the first multinationals to invest in the local tobacco industry. The company has invested over €250 million in Romania to date.
March 31, 2021
Bidi Vapor Enters Four New Markets
Bidi Vapor successfully completed the regulatory process to enter four new, significant markets. Bidi Vapor’s primary offering, the Bidi Stick is a closed system disposable electronic nicotine-delivery system (ENDS).
Bidi Vapor recently successfully received premarket authorization from the United Kingdom’s regulatory body, the Medicines and Healthcare products Regulatory Agency, to sell and market Bidi Vapor products through Kaival Brands in the U.K.
Moreover, Bidi Vapor has successfully completed all necessary certifications and finished the process for distribution approvals to market and sell products in Russia, New Zealand and Australia.

Once Kaival Brands solidifies local distribution agreements, we will begin to sell and market our full scope of products.
Niraj Patel, CEO, Kaival Brands
“We are extremely excited to roll out Bidi Vapor products in four significant, new markets for us,” said Niraj Patel, Kaival Brands’ CEO, in a statement. “Once Kaival Brands solidifies local distribution agreements, we will begin to sell and market our full scope of products. We believe our first sales in each of these new regions will occur within the next six months with U.K. being the first.”
Kaival Brands will showcase its Bidi Stick at the VOXPO virtual trade show on April 28–30.
“We believe the Bidi Stick will be a welcomed entry into the U.K. market as long-time adult cigarette smokers look to transition to ENDS products,” said Patel, who is also president and CEO of Bidi Vapor.
“While the VOXPO conference is our first international show, we anticipate participating in similar events in Australia, New Zealand and Russia. We see ample opportunity in these new markets, as the success we’ve seen in the United States shows us that once consumers discover an e-cigarette that can provide them a consistent, premium experience, they will welcome the option.”
March 31, 2021
BATSA opens first VUSE Inspiration store

Photo: BAT
British American Tobacco South Africa (BATSA) has opened the first VUSE Inspiration store in South Africa in the Canal Walk shopping center in Cape Town.
VUSE Inspiration stores will be opened at 67 existing sites throughout South Africa.
“To date, we have made an extensive investment in bringing Twisp into BATSA’s portfolio, and we plan to invest further in our tobacco harm reduction strategy in South Africa,” said BATSA General Manager Johnny Moloto in a statement. “We will be expanding our number of kiosks, investing in bringing our new products to market and enhancing the skills of our BAT team.”
Another 15 new sites in key locations will be added to the VUSE network by December as part of a significant expenditure project.
“The opening of our first flagship VUSE Inspiration store in South Africa is an important milestone in delivering on our harm reduction strategy and our investment in science and innovation to demonstrate the potential of our extended portfolio of products,” said Moloto.
March 29, 2021
Tobacco Brand Selection Dwindling in N. Ireland

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Cigarette makers are removing their brands from the Northern Ireland market due to the additional costs incurred from post-Brexit rules, reports Belfast Live.
The Northern Ireland Protocol requires tobacco products sold in the region to continue to bear EU pictorial health warnings, whereas the remainder of the U.K. is moving to Australia’s style of health warnings.
The protocol, which was agreed upon by the EU and U.K. to avoid a hard border on Ireland, keeps Northern Ireland in the EU single market for goods but includes extra checks and regulatory processes for products arriving in Northern Ireland from Great Britain.
Imperial Brands announced that it will withdraw some of its brands in Northern Ireland due to the cost of establishing separate production lines for the different packaging.
Japan Tobacco International (JTI) announced a similar type of move, saying, “the post-Brexit requirement to have different packaging in Northern Ireland (i.e., different health warnings) will mean a very small additional reduction in our NI product range. JTI’s product range in Northern Ireland remains extensive, and whenever we delist a product, we always take consumer needs into careful consideration to ensure we have a range of alternatives and pack formats/sizes available within our brand portfolio for adult consumers to choose from.”
March 19, 2021
Dutch Smoking Prevalence Down

Photo: Tobacco Reporter archive
Adult smoking prevalence rate for occasional smokers in the Netherlands was 20 percent in 2020, down from 22 percent in 2019, Statistics Netherlands revealed.
For daily smokers, the prevalence rate remained at 15 percent for 2020 and 2019. The survey also noted that 46 percent of adults said that they never smoked and that 34 percent said that they formerly smoked, figures that were also the same for 2020 and 2019.
The percentage of nonsmokers aged 18 and over who said that they have never been or were barely exposed to environmental tobacco smoke rose from 75 percent in 2019 to 79 percent in 2020.
The Dutch government aims to reduce smoking among adults to 5 percent by 2040, according to Statistics Netherlands.

March 12, 2021
Global Tobacco Market to Reach $1.07 Billion

Photo: JTI
The global tobacco market size is expected to reach $1.07 billion by 2028, according to a new report by Grand View Research. It is expected to expand at a compound annual growth rate (CAGR) of 1.8 percent from 2021 to 2028.
According to the authors, the shifting preference among youth and the working-class population toward tobacco products, including cigars and next-generation products, is crucial for the market growth. Moreover, growing student spending on tobacco products across the globe is expected to offer new avenues for the growth of the market over the forecast period.
By product, the cigarettes segment held the largest share of more than 75 percent in 2020, according to the report. Easy access to cigarettes at economical prices among the consumers through retail shops is expected to drive this product segment in the near future.
The next-generation products segment is anticipated to be the fastest-growing segment with a CAGR of 2.8 percent from 2021 to 2028. The growing acceptance of next-generation products, including e-cigarettes, in developed economies of North America and Europe is expected to remain a favorable factor for the segment growth.
The Middle East and Africa is anticipated to be the fastest-growing regional market with a CAGR of 3 percent from 2021 to 2028, owing to the increasing demand for premium and next-generation tobacco products with enhanced flavors.
February 10, 2021
Record Tobacco Spending in South Korea

Photo: Tobacco Reporter archive
South Korean households spent a record KRW4.3 trillion ($3.96 billion) on liquor and cigarettes between July and September—6.2 percent more than in the same period the previous year, reports The Korea Herald, citing data from the country’s central bank.
The figure marks the highest quarterly figure since the central bank started keeping records in 1970.
The bump in spending follows stricter social distancing measures as coronavirus cases surged in South Korea.
Economic slumps have led to an increase in alcohol and tobacco spending in the past.
The first and second quarters of 1997 saw liquor and cigarettes spending increase by 20 percent and 18.6 percent, respectively, in the runup to the Asian financial crisis.
According to data from Statistics Korea, South Korean households spent an average of KRW43,000 on alcohol and tobacco during the same period, posting a 10.7 percent year-on-year increase.
January 6, 2021