Event: on March 11, the State Tobacco Monopoly Administration issued the measures for the administration of e-cigarettes and the national standard for e-cigarettes (second draft for comments). Among them, the measures for the administration of e-cigarettes will be officially implemented on May 1, 2022, and the comment period of the national standard of e-cigarettes (second exposure draft) will end on March 17, 2022.
China’s e-cigarette policy was accelerated, and the measures for the administration of e-cigarettes were officially implemented on May 1
China’s e-cigarette regulation has been implemented, and the overall policy promotion has been accelerated. On November 26, 2021, the State Council officially revised the regulations for the implementation of the tobacco monopoly law and added Article 65 of the supplementary provisions: “new tobacco products such as electronic cigarettes shall be implemented with reference to the relevant provisions of these regulations.” Then, on November 30 and December 2, 2021, the state tobacco monopoly administration successively issued the national standard for electronic cigarettes and the administrative measures for electronic cigarettes (Draft for comments). Then, the State Tobacco Monopoly Administration issued the measures for the administration of e-cigarettes and the national standard for e-cigarettes (second draft for comments), and the measures for the administration of e-cigarettes will be officially implemented on May 1, 2022. The pace of promoting the overall policy has been significantly accelerated.
Focusing on the protection of minors, the overall control of the whole industrial chain has become stricter, and only tobacco flavored e-cigarettes are retained
The measures for the administration of e-cigarettes include general provisions, production and quality management, sales management, import and export trade and foreign economic and technical cooperation, supervision and inspection, and supplementary provisions, with a total of six chapters and 45 articles, which stipulate the production, sales, transportation, import and export, supervision and Administration of e-cigarettes in China. The core contents include:
1. Emphasize and highlight the protection of minors. In addition to Article 22, which continues to emphasize “prohibiting the sale of electronic cigarette products to minors”, Article 6 is also added: “the state and society shall strengthen the publicity and education on the health hazards of electronic cigarette smoking, dissuade teenagers from smoking electronic cigarettes, and prohibit primary and secondary school students from smoking electronic cigarettes.”
2. The production side realizes license system management, It is clear that tobacco and oil production should be supervised at the same time: “set up e-cigarette production enterprises (including product production, agent processing, brand holding enterprises, etc.) , atomization production enterprises and nicotine production enterprises for electronic cigarettes must be approved by the Department of tobacco monopoly administration under the State Council and obtain the license of tobacco monopoly production enterprises. The initial public offering and listing of stocks, capital construction or technological transformation to expand production capacity shall be reported to the competent department of tobacco monopoly administration under the State Council for examination and approval. “
3. With reference to the traditional cigarette license management, the sales side will establish a national unified e-cigarette transaction management platform, and the exclusive store will develop into a collection store in the future. The relevant provisions include: “(1) an enterprise that has obtained a license for a tobacco monopoly wholesale enterprise shall be approved by the Department of tobacco monopoly administration under the State Council and may engage in the wholesale business of electronic cigarette products only after changing the scope of the license. (2) Those engaged in e-cigarette retail business shall apply to the competent department of tobacco monopoly administration for a tobacco monopoly retail license or change the scope of the license according to law. (3) The Department of tobacco monopoly administration under the State Council shall establish a national unified e-cigarette trading management platform. (4) 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 from local e-cigarette wholesale enterprises, and shall not exclusively operate e-cigarette products on the market. “
4. The Management Measures specify that only tobacco flavored e-cigarettes will be retained, and the amount of additives will be reduced according to the national standard. In addition to the “measures for the administration of e-cigarettes” which clearly “prohibit the sale of flavored e-cigarettes other than tobacco flavor and e-cigarettes that can add atomization by themselves”, the national standard of e-cigarettes (second exposure draft) also adjusted the number of substances permitted to use atomization additives from the previous 122 to 101, but still retained cocoa extract, vanilla bean tincture, peppermint oil Lemon oil, etc.
5. The margin of export supervision is relaxed: “the packaging of e-cigarette products specially for export shall meet the requirements stipulated by the competent department of tobacco monopoly administration under the State Council. E-cigarette products not sold in China and only used for export shall meet the laws, regulations and standards of the destination country or region.”
Investment suggestion: the implementation of China’s e-cigarette supervision boots and stricter policies will further push up the entry threshold of the industry, and the concentration may continue to improve. Leading enterprises in the industrial chain with product, brand and technical advantages are expected to benefit. It is suggested to pay attention to smore international, the global leader in atomization technology, and Shenzhen Jinjia Group Co.Ltd(002191) , the high-quality target of China tobacco supply chain.
Risk warning: the new tobacco policy supervision exceeds the expected risk; The development of e-cigarette enterprises is less than the expected risk; Industry competition intensifies risks.
