The market expects that the regulation of e-cigarette industry will increase in the near future, and now the boots are on the ground.
On March 11, the State Tobacco Monopoly Administration issued an announcement on the implementation of the measures for the administration of electronic cigarettes on May 1, 2022, clarifying the detailed rules for the supervision of new tobacco products such as electronic cigarettes. At the same time, publicly solicited opinions on the national standard of electronic cigarette (second draft for comments), with clear taste and limited to tobacco flavor
Source: Official Website of the State Tobacco Monopoly Administration
Affected by this news, zhonggai shares fog core technology (its Yueke brand is China's first e-cigarette brand) plunged 36.54% last night. In fact, recently, many e-cigarette concept stocks in A-Shares and Hong Kong stocks have fallen endlessly. From March 3 to 11, smore international, the world's leading manufacturer of atomization equipment, fell 26.2% and its market value evaporated by HK $44.2 billion.
After the release of the above policies, the e-cigarette Industry Committee of China Electronic Chamber of commerce immediately stated that it would firmly support the requirements of the state tobacco monopoly administration on promoting the legalization and standardization of e-cigarette industry governance, strictly implement the relevant regulatory policies of the management measures on e-cigarette, and actively organize, guide, coordinate and provide practical services to the industry, We will do a good job in policy interpretation, give play to the role of the association as a bridge, earnestly protect minors, encourage enterprises to develop and innovate, guide the standardized and orderly development of the Chinese market, and actively explore the international market.
In addition to fog core technology and the international trade center, A shares and Hong Kong stocks related to the concept of electronic cigarette are also Shenzhen Jinjia Group Co.Ltd(002191) (China Tobacco standard), Warburg International (tobacco flavor spice), Anhui Genuine New Materials Co.Ltd(603429) , Shanghai Shunho New Materials Technology Co.Ltd(002565) , Shantou Dongfeng Printing Co.Ltd(601515) , China tobacco Hongkong, China Burton, Shenzhen Aisidi Co.Ltd(002416) Shenzhen Aisidi Co.Ltd(002416) , China (atomization channel leader) and so on. P align = "center" e-cigarette enterprise's IPO must be reviewed and approved by the competent department
Compared with the draft for comments, the official draft of the measures for the administration of electronic cigarettes has many changes and many new contents: for example, the new "the initial public offering and listing of enterprises specified in the preceding paragraph shall be reported to the competent department of tobacco monopoly administration under the State Council for examination and approval". The "enterprises mentioned in the preceding paragraph" include electronic cigarette production enterprises (including product production, agent processing, brand holding enterprises, the same below), atomization production enterprises and nicotine production enterprises for electronic cigarettes. Industry insiders believe that this means that it is more difficult for China's main e-cigarette enterprises to have new listed enterprises.
Another example is the addition of "the purchase and sales plan of tobacco monopoly products such as tobacco leaves, redried tobacco leaves and cut tobacco issued by the competent department of tobacco monopoly administration under the State Council". Previously, some market participants expected that the e-cigarette industry may adopt the supervision mode of unified purchase and marketing or quota system. At present, it is the first to land in some raw material procurement links.
In addition, on the basis of "enterprises or individuals with tobacco monopoly and retail license qualified to engage in e-cigarette retail business shall purchase e-cigarette products from local e-cigarette wholesale enterprises", add "and shall not exclusively operate e-cigarette products sold on the market". Insiders said that this is a fatal blow to the current e-cigarette exclusive store system. After the administrative measures come into force, the exclusive store will become a collection store business model of a variety of e-cigarette products.
Other new contents include: it is prohibited to hold exhibitions, forums and expositions to promote e-cigarette products in various forms; The transportation of electronic cigarette products, aerosols and nicotine for electronic cigarettes shall be subject to the supervision of the Department of tobacco monopoly administration; Imported electronic cigarette products shall be subject to commodity inspection in accordance with relevant national regulations.
It is worth noting that the measures for the administration of intellectual property rights have added a new measure to combat violations of intellectual property rights.
Source: State Tobacco Monopoly Administration
It should be emphasized that licensed operation is an important measure to further standardize the development of e-cigarette industry. The administrative measures require that e-cigarette production enterprises, atomization production enterprises and e-cigarette nicotine production enterprises must obtain a tobacco monopoly production enterprise license and be approved and registered by the market supervision and administration departmentP align = "center" e-cigarette taste will be further limited
Industry insiders believe that in combination with the above two documents, the biggest impact on the e-cigarette industry lies in the prohibition of flavors other than tobacco , which is also the main reason for the sharp decline of fog core technology's share price.
According to the second exposure draft of the national standard of electronic cigarette, the design of atomization shall not induce minors, and the characteristic flavor of the product shall not show other flavors except tobacco; The atomization shall contain nicotine. Corresponding to the administrative measures, it is prohibited to sell flavored e-cigarettes other than tobacco flavor and e-cigarettes that can add atomization by themselves.
Source: State Tobacco Monopoly Administration
An investor who has been following the e-cigarette industry for a long time told the China Securities Journal: "banning the taste means that the attraction of e-cigarettes has decreased significantly. This can be seen from two aspects: on the one hand, it is not friendly to the existing consumers who replace cigarettes, and on the other hand, it protects the young consumers who were not smokers before."
Some analysts believe that according to the current information, in the future, the e-cigarettes sold in China will only have tobacco taste, flavored e-cigarettes will be banned, and only mixed flavors with tobacco taste as the main tone can be sold. When the FDA introduced the ban on e-cigarettes two years ago, it retained the taste of tobacco and menthol, and other flavoring products were also required to be taken off the shelves. In contrast, China's e-cigarette regulation may be stricter than that of the United States.
According to the first exposure draft of the national standard of electronic cigarette, 122 substances and the maximum amount of substances are specified in the list of substances temporarily licensed for the use of aerosol additives. However, the second exposure draft reduced the number of additives to 101, and all the ingredients on the smoke bomb should be accurately printed on the product.
There is little change in some contents of electronic cigarette sets in the two exposure drafts. For example, electronic cigarette sets and cigarette bombs using electronic cigarette liquid should have a closed structure to prevent artificial filling; Electronic cigarette sets and cartridges using electronic cigarette liquid shall have good sealing and shall not leak liquid; The electronic cigarette set shall have the function of preventing children from starting and the protection function of preventing accidental starting, etc.
