Electronic cigarette ushers in strong supervision!
On March 11, the official website of the state tobacco monopoly administration announced that in order to further strengthen the supervision of new tobacco products such as e-cigarettes, the measures for the administration of e-cigarettes will be formulated and will be implemented from May 1. In addition to strict industry access requirements, it also stipulates that e-cigarette enterprises need to be approved by the tobacco monopoly department for listing.
At the same time, the State Tobacco Monopoly Administration issued the national standard for electronic cigarettes (second exposure draft) (hereinafter referred to as “second exposure draft”), requiring written feedback to the project team before March 17. Among them, the second exposure draft requires that e-cigarettes cannot have non tobacco taste. This will significantly reduce the appeal of e-cigarettes to consumers.
The above news immediately fermented in the capital market. Fog core technology, which is listed on US stocks, once fell more than 20% before trading. At present, the share price of fog core technology has fallen by more than 90% compared with the previous highest price of $39.11 per share. In the intraday trading, fog core technology once fell by more than 40% and finally closed down 36.54% to US $1.49/share.
e-cigarettes are subject to strict supervision, and enterprises need to be reviewed for listing
In retrospect, on November 10, 2021, the decision of the State Council on Amending the regulations for the implementation of the tobacco monopoly law of the people’s Republic of China (hereinafter referred to as the “decision”) made it clear that “new tobacco products such as electronic cigarettes shall be implemented with reference to the relevant provisions of these regulations.”
After the promulgation and implementation of the decision, the State Tobacco Monopoly Administration issued the measures for the administration of electronic cigarettes (Draft for comments) on December 2, 2021. Now the measures for the administration of electronic cigarettes have been officially issued and will be officially implemented on May 1, 2022.
Generally speaking, the main contents of the measures for the administration of e-cigarettes are as follows: first, clarify the definition and supervision object of e-cigarettes; The second is to implement license management for e-cigarette production, wholesale and retail entities. There is no new type of administrative license in e-cigarette license management, and only corresponding items are added to the license scope of tobacco monopoly production, wholesale and retail licenses; Third, implement channel management for e-cigarette sales, establish e-cigarette transaction management platform, and standardize e-cigarette sales methods; Fourth, carry out the whole process management of the quality of e-cigarette products, and establish the technical review and tracking mechanism of e-cigarette products; Fifth, the transportation, import and export of e-cigarettes shall be supervised according to law.
Compared with the measures for the administration of electronic cigarettes (Draft for comments), the measures for the administration of electronic cigarettes have added a number of contents, which generally reflects the trend of strict supervision.
First, the initial public offering and listing of e-cigarette related enterprises shall be reported to the competent department of tobacco monopoly administration under the State Council for examination and approval.
Source: electronic cigarette management measures
In the view of insiders, this shows that the strict supervision attitude will crack down on the enthusiasm of e-cigarette enterprises to plan to go public. Previously, China’s e-cigarette market developed rapidly, which is the way that many investment institutions are optimistic about the capitalization of the e-cigarette industry.
Another view is that the pre-approval of the listing of e-cigarette enterprises provides a certain basis for the capitalization of the industry, but the subsequent specific review standards also need to be supported by corresponding laws and regulations.
At present, the recent stock price performance of e-cigarette industry chain enterprises, including fog core technology and smore international, is not satisfactory compared with the previous pursuit by investors in the capital market.
Recent stock price trend of SIMORE International
Second, enterprises or individuals that have obtained the tobacco monopoly and retail license and are qualified to engage in e-cigarette retail business shall purchase e-cigarette products in local e-cigarette wholesale enterprises, and shall not exclusively operate e-cigarette products sold on the market.
Third, the supervision and administration of e-cigarette advertising shall be subject to the provisions on tobacco advertising in relevant laws, regulations and rules. It is prohibited to hold exhibitions, forums, Expos, etc. to promote electronic cigarette products in various forms.
Fourth, 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.
Fifth, the import of electronic cigarette products shall be subject to commodity inspection in accordance with the relevant provisions of the state.
Sixth, in the measures for the administration of electronic cigarettes, the business entity shall go through the relevant registration formalities with the market supervision and administration department according to law when obtaining or changing the relevant licensing matters.
VII. Heated cigarettes shall be included in cigarette management, and other new tobacco products shall be implemented in accordance with the relevant provisions of the measures for the administration of electronic cigarettes.
e-cigarette taste is strictly restricted
It is also unexpected that the state tobacco monopoly administration has solicited opinions on the national standard of electronic cigarette (Draft for comments) once last year, and now solicits opinions again.
among them, the more “fatal” content added in the second exposure draft is: “the atomization design shall not induce minors and shall not make the characteristic flavor of the product show other flavors except tobacco.”
Source: national standard of electronic cigarette (second exposure draft)
In contrast, the previous documents did not limit the taste of e-cigarettes. E-cigarettes attract consumers and are mostly young consumers. The main reason is that a variety of flavors of e-cigarettes can enable consumers to obtain different experiences, which is obviously different from traditional tobacco.
Taking fog core technology as an example, its main business is the R & D, design and sales of relx Yueke brand electronic atomizer. It has launched five series of closed rechargeable electronic cigarette products: Yueke generation, Yueke alpha, Yueke infinite, Yueke LingDian and Yueke phantom.
On March 11, fogcore announced that the company achieved a net revenue of 8.52 billion yuan in 2021, a year-on-year increase of 123.1%; Under non US GAAP, the adjusted net profit in 2021 was 2.25 billion yuan, a year-on-year increase of 181.1%.
Wang Ying, founder, chairman and CEO of Wuxin technology, said: “although the external environment has been changing in the past year, and the repeated covid-19 pneumonia epidemic has also brought many challenges to the operation, we are still committed to optimizing the existing distribution and retail network, increasing investment in scientific research and new products, and actively promoting the digital upgrading of the company.”
After the taste of e-cigarette is strictly restricted by regulation, whether e-cigarette enterprises such as fog core technology can retain users again will become a major challenge.
Industry Association: firmly support and implement the e-cigarette regulatory policy
Faced with the introduction of stricter regulatory policies, the electronic cigarette industry committee of China Electronic Chamber of commerce immediately gave an attitude. In March 11th, the China Electronic Commerce Chamber announced that the official account of WeChat public was strongly supported and implemented by .
The e-cigarette Industry Committee of China Electronic Chamber of Commerce said that they 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 on e-cigarettes implemented by the management measures, always adhere to the core values of “national interests first and consumer interests first”, and actively organize and Guide, coordinate and provide practical services, do a good job in policy interpretation, give play to the role of the association as a bridge, and do a good job in the protection of minors.
At the same time, the electronic cigarette industry committee of China Electronic Chamber of Commerce will encourage enterprises to research and innovate, guide the standardized and orderly development of China’s market, actively explore the international market and make new contributions to the development of China’s new tobacco industry.
strict supervision has been very obvious before
The background of the introduction of regulatory policies such as the measures for the administration of electronic cigarettes is mainly that in recent years, due to the regulatory gap and the disorderly development of the electronic cigarette industry, some products have problems such as unclear nicotine (nicotine, the same below), unknown added ingredients, cigarette oil leakage and so on. In particular, some operators publicize and mislead consumers, induce minors to smoke, and infringe on minors’ physical and mental health. All sectors of society have strongly reflected and constantly called for strengthening supervision.
and before the introduction of regulatory policies such as the measures for the administration of electronic cigarettes, the trend of strict supervision was very obvious
On August 28, 2018, the State Administration of market supervision and the State Tobacco Monopoly Administration issued the notice on banning the sale of e-cigarettes to minors.
On November 1, 2019, the state tobacco monopoly administration and the State Administration of Market Supervision issued the circular on further protecting minors from e-cigarettes, requiring the competent administrative department of tobacco monopoly to strengthen the market supervision of e-cigarettes and strengthen the monitoring, dissuasion and suppression of the promotion and sale of e-cigarettes through the Internet, Investigate and deal with all kinds of illegal acts found or notify relevant departments according to law.
On July 14, 2020, in order to further protect minors from e-cigarettes, the state tobacco monopoly administration and the State Administration of market supervision formulated the action plan for special inspection of e-cigarette market.
On June 18, 2021, in order to further protect minors from tobacco abuse, the state tobacco monopoly administration and the State Administration of market supervision formulated the special action plan for “guarding growth” to protect minors from tobacco abuse, which mentioned that we should continue to strengthen the supervision of the e-cigarette market, strictly supervise the business behavior of e-cigarettes in an all-round way, and continue to strengthen the control of Internet channels Guide the legal and standardized operation of e-cigarette physical stores.
On March 11, 2022, the official website of the state tobacco monopoly administration showed that in order to implement the special work requirements of the state tobacco monopoly administration and other four departments on cleaning up and rectifying the sale of e-cigarettes to minors, severely cracking down on crimes involving e-cigarettes, and resolutely protect the healthy growth of minors, recently, Liaoning Tobacco Monopoly Administration, Liaoning Provincial Public Security Department, Liaoning provincial market supervision and Administration Bureau, Liaoning Provincial Department of education The four departments of the Liaoning Branch of the national computer network and information security management center jointly held a teleconference on the mobilization and deployment of the special work to clean up and rectify the sale of e-cigarettes to minors and severely crack down on crimes involving e-cigarettes.
The meeting stressed that the tobacco departments at all levels in the province should not only be good organizers, but also good executors, cooperate closely with relevant departments, strengthen social publicity, and strictly investigate and deal with all kinds of illegal acts involving e-cigarettes. Taking this special work as an opportunity, we will strive to solve the prominent problems faced by e-cigarette supervision, form a long-term mechanism to protect the physical and mental health of minors, and show strong confidence and firm determination in supervision according to law.
