Smoke screen

Why a ban on online sales of e-cigarettes is only partly health-related


They don’t want her vaping

More than two months ago Donald Trump promised a crackdown on vaping. He said that e-cigarettes that weren’t formulated to taste like tobacco were set to be taken off the market and that the minimum age for purchasing e-cigarettes could be raised from 18 to 21.

Tobacco firms are waiting for a final decision from the Trump administration amid intense lobbying from vaping firms and health groups alike.

Over in China and regulators have been stepping up sales restrictions on e-cigarettes as well. One of the talking points, however, is the fact that the state-owned tobacco monopoly has a major say in making the changes.

Earlier this month the State Tobacco Monopoly Administration (STMA), the tobacco regulator, and the State Administration for Market Regulation (SAMR) jointly announced a directive aimed at banning the sales of e-cigarettes on internet platforms.

In order to protect adolescents from vaping, regulators said all websites and apps selling e-cigarettes would be shut down. Online marketing campaigns would also be banned.

About 10 million Chinese are now using electronic cigarettes, Xinhua reported last week, and the vaping rate among people aged between 15 to 24 is the highest.

The two government agencies introduced a ban on selling vaping products to people under 18 in August last year. However, many of them were purchasing e-cigarettes via the internet, so the decision was taken to ban e-commerce sales as well.

“The ban has taken half of the life from the vaping industry,” Jiemian reported, noting that more than 45% of e-cigarettes are sold online. According to the news portal, many of the Chinese vaping firms, mainly based in Shenzhen, are manufacturing for American brands such as Juul Labs as well (in fact, up to 90% of American e-cigarettes are made by Chinese producers). So the e-commerce ban comes as a double blow, with a crackdown imminent in the US too.

The vaping industry has been a hotspot for private equity investors, attracting a number of internet celebrities to launch their own vaping brands. Jiemian said there are more than 4,000 of them in China. A ban on online sales is less likely to hurt popular ones such as RELX, which conducts most of its sales through distributors. It’s more of a risk for the smaller firms, which rely on the online sales channel.

The ban is likely to disrupt foreign firms’ expansion plans as well. In September Juul Labs pulled all of its products from Tmall and, just days after making its debut on two of China’s most popular e-commerce platforms.

E-cigarettes also featured in CCTV’s annual consumer rights programme in March, with the state broadcaster suggesting that some of the vaping oils could contain up to 60 times more nicotine than their labels suggest (see WiC445).

Other insiders complain that the government is just trying to help tobacco giant STMA – which both regulates the industry and sells the majority of cigarettes. STMA contributes a huge chunk of the state’s tax income every year and any move to curb the vaping market should protect its revenues from sales of more traditional cigarettes.

“The government is right to ban e-cigarettes but what would be even better is that all [conventional] tobacco firms are shut down,” one internet user wrote on Jiemian. “I am afraid that the driving force behind the crackdown is really tax income.”

“E-cigarettes are bad for our health but don’t tell me conventional ones are healthier,” added another, who claimed to be a chain smoker. “Young people should not take up vaping. But long-time smokers should really switch to vaping,” he suggested.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.