According to the previous provisions, the Administrative Measures for Electronic Cigarettes (hereinafter referred to as the "Administrative Measures") were officially implemented on May 1. The Administrative Measures stipulate that the sale of flavored e-cigarettes other than tobacco flavors and e-cigarettes that can add atomizations by themselves is prohibited.
However, on April 8, the State Administration for Market Regulation (State Standardization Administration) approved the national standard for e-cigarettes, stipulating that it will be implemented from October 1, 2022, clarifying a five-month implementation transition period. Industry insiders told Shell Financial Reporter that upstream brands and production enterprises have followed the regulations to stop the production of fruit-flavored electronic cigarettes, but according to the news, the terminal store channel can continue to clear the inventory of fruit-flavored electronic cigarettes before September 30.
The regulations on e-cigarettes are becoming more detailed. On April 25, the State Tobacco Monopoly Administration announced the "Several Policies and Measures on Promoting the Legalization and Standardization of the E-cigarette Industry (Trial)". On April 26, the State Tobacco Monopoly Administration also issued the implementation rules on the preliminary review of the initial public offering of shares and listing of e-cigarette-related enterprises at home and abroad.
Industry insiders said that the pre-review of listing is not specifically for e-cigarette-related enterprises, and many industries have such management norms. Under a series of regulatory rules, the overall market will be more orderly, and at the same time, the e-cigarette market pattern may be redivided.
On May 1, e-cigarettes were sold in shops. Beijing News shell financial reporter Sun Wenxuan photo
During the transition period, stores can continue to clear fruity inventory
A number of e-cigarette brand store staff told Shell financial reporters that the current fruit-flavored e-cigarettes in the store can continue to sell, and most of the taste is complete, can continue to sell until September 30 this year, "the state to the transition period to September 30, let the manufacturers sell inventory." Shell financial reporter learned that at present, the price of smoke bombs and cigarette sticks of major brands of fruit-flavored electronic cigarettes remains stable.
On March 15, e-cigarettes were sold in a shopping mall in Chaoyang, Beijing. Beijing News shell financial reporter Sun Wenxuan photo
On April 8, the State Administration for Market Regulation (Standardization Administration of the People's Republic of China) approved the national standard for e-cigarettes, which will be implemented from October 1, 2022, and the transition period will end on September 30, 2022.
"Considering that after the release of the national standard for "electronic cigarettes", e-cigarette manufacturers need to design products according to the requirements of the standards, complete product transformation, and apply to the relevant departments for product testing and technical review, which require a certain amount of time, so a 5-month implementation transition period is set."
"Our upstream brand side and foundry production enterprises actually have to follow this "Management Measures" and no longer produce fruit flavors, including smoking utensils, but also follow the relevant provisions of children's locks, but terminal stores can also sell the current inventory until September 30th." Zhao Yangbo, co-founder of e-cigarette brand RXR Shiwu, told Shell Financial Reporter.
Zhang Yi, CEO and chief analyst of Ai Media Consulting, explained that the "Management Measures" are more of a specification and guidance at the level of market supervision, focusing on some layout and requirements in terms of channels, qualifications, and store management. The national standard for e-cigarettes to be implemented on October 1 is mainly to regulate e-cigarette products.
"Can you still buy fruit that tastes unhappy?" A number of e-cigarette store staff suggested that reporters should try to take advantage of this buffer period to stock up on some goods, "After September 30, you can't sell it." Now it is time to clear the inventory, the factory has arranged to stop production, and there is no fruit taste after selling. "Before this transition period was clear, many e-cigarette enthusiasts were worried that they could no longer buy fruity e-cigarettes after May 1, and they opened the hoarding mode, and some even bought hundreds of boxes of fruit-flavored e-cigarette cartridges. At this stage, due to the clarity of the transition period, the call for hoarding and price increases is not as enthusiastic as before.
Both the Administrative Measures and the national standards for electronic cigarettes prohibit the sale of flavored electronic cigarettes other than tobacco flavors and electronic cigarettes that can add atomizations by themselves. This means that in the future, there will only be tobacco-flavored e-cigarettes on the market. However, the staff of a number of e-cigarette brand stores have told Shell financial reporters that new tobacco-flavored e-cigarette products have not yet come out. "Our company only officially developed the tobacco flavor after receiving the policy notice, it is not so fast." A YOOZ e-cigarette store staff said, "We are also looking forward to the new taste coming down quickly, many customers are also waiting to see that, do not know whether the tobacco taste is good or not." ”
Previously, an electronic cigarette practitioner told Shell Financial Reporter, "Now the proportion of non-tobacco flavored smoke bombs in the product is relatively large, and it needs to be adjusted in the future, and the user's reaction to the taste adjustment is not yet known." "The suspension of non-tobacco-flavored e-cigarettes such as fruit flavor, inventory clearance, and the adjustment of stores and the restructuring of products are becoming their daily routines.
On March 15, e-cigarettes were sold in a shopping mall in Chaoyang, Beijing. Beijing News shell financial reporter Sun Wenxuan photo
The inevitable pain of industry compliance
On April 25, the State Tobacco Monopoly Administration announced the "Several Policy Measures on Promoting the Legalization and Standardization of the E-cigarette Industry (Trial)" (hereinafter referred to as "Several Policy Measures (Trial)").
"E-cigarettes are a new type of tobacco product. After more than ten years of rapid development, the mainland has become an important production and manufacturing base in the global e-cigarette industry chain. Due to the existence of regulatory gaps, in recent years, the blind development of the e-cigarette industry, the lack of standards for e-cigarette production, the lack of quality assurance for e-cigarette products, and the disorderly competition in the e-cigarette market have posed a huge risk to the interests of consumers, the physical and mental health of minors, and the safety and stability of the industrial chain. When interpreting this policy, the State Tobacco Monopoly Administration said that the "Several Policy Measures (Trial)" takes the standardization of the order of the e-cigarette industry, the protection of people's health and safety, and the strengthening of tobacco control as the main line, focusing on solving problems such as disorderly development of the industry, uneven product quality, and disorderly competition in the market.
Shell financial reporter noted that the third article of the "Several Policy Measures (Trial)" mentions that it is necessary to adjust and optimize the industrial structure, strictly control the new production capacity, reasonably control the scale of production capacity, and prevent overcapacity. Guided by optimizing the allocation of resources and meeting market demand, we will maintain industrial concentration at a reasonable level and guide enterprises that do not adapt to market competition to withdraw in an orderly manner.
"Before, there were many small and medium-sized enterprises in Shenzhen that produced non-compliant products, and the third measure would gradually eliminate them, on the one hand, they did not meet the regulations, on the other hand, their production also needed a license, and it may be difficult to obtain this approval." Zhao Yangbo said that under the influence of this regulation, e-cigarette brands and upstream production enterprises will be concentrated to the head, product quality is more secure, at the same time, the short and medium term will increase some products, product prices will rise to a certain extent, for the industry, the overall market will be more orderly, but because the competition tends to the head, the market pattern may be re-divided, "and the homogenization of products may be relatively more serious." ”
Internet analyst Ding Daoshi said that for leading companies, this provision actually has more advantages than disadvantages, because after a series of thresholds, some small and medium-sized enterprises may be swept out, and for large enterprises, their market share should be further expanded.
Article 19 of the "Several Policy Measures (Trial)" stipulates that a preliminary review system shall be established for the initial public offering of shares and listing applications of e-cigarette enterprises at home and abroad. The competent administrative department for tobacco monopoly under the State Council shall perform the duties of preliminary review, and the e-cigarette enterprise to be listed may perform the follow-up listing procedures only after review and approval. On April 26, the State Tobacco Monopoly Administration also issued the implementation rules on the preliminary review of the initial public offering of shares and listing of e-cigarette-related enterprises at home and abroad.
The Detailed Rules mention that e-cigarette-related enterprises that intend to issue shares for the first time at home and abroad and are listed shall submit the application documents for pre-examination and related materials to the competent administrative department for tobacco monopoly under the State Council, and only after the review and approval of the competent administrative department for tobacco monopoly under the State Council can they perform the subsequent issuance and listing procedures. The preliminary review of the application for the initial public offering and listing of the e-cigarette-related enterprise does not indicate that a substantial judgment or guarantee is made of the investment value of the securities or the returns of investors.
Shell financial reporter noted that there are more than 20 items in the pre-review material list, including basic information such as business licenses and enterprise equity structures, tobacco monopoly production enterprise licenses, identity information of directors, supervisors and senior management personnel of enterprises, self-inspection reports on the strict implementation of the "Management Measures", reports on the implementation of mandatory national standards and related normative documents, and data on raw material procurement, product production and overseas sales orders related to export sales in the past 36 months.
"This increases the financing difficulty and financing cost of the brand, but it will also make the industry more compliant, and the development will certainly be inhibited in the short term, but this is also an inevitable pain brought about by compliance." Zhao Yangbo said.
Zhang Yi said that the tobacco industry is indeed a more sensitive and special industry, but in addition to tobacco, there are many other industries that will carry out pre-approval before the IPO, and meet the management norms of most special fields. "For enterprises in this industry, the first thing is to have full legal and policy expectations and psychological preparation. For the pre-review of enterprises to be listed, it mainly involves legal compliance in all aspects, and in case a large number of enterprises suddenly apply for listing, this pre-review will have a certain regulatory effect. ”
In the future, the wholesale circulation of e-cigarettes may change greatly
The unified e-cigarette management and trading platform has also been once again emphasized by the "Several Policy Measures (Trial)". Article 21 mentions the establishment of a unified national e-cigarette trading management platform, and the formulation of open and transparent e-cigarette trading management rules and platform operation guidelines. E-cigarette market entities should carry out transactions through the e-cigarette trading management platform. Promote the whole process management of e-cigarette trading business flow, logistics, capital flow, and information flow, and take transaction data as an important basis for market standard management, status evaluation and effective supervision.
Article 20 of the previously promulgated Administrative Measures stipulates that the competent administrative department for tobacco monopoly under the State Council shall establish a unified national e-cigarette trading management platform. E-cigarette product manufacturers and e-cigarette brand holding enterprises that have obtained tobacco monopoly licenses in accordance with the law shall sell e-cigarette products to e-cigarette wholesale enterprises through the e-cigarette transaction management platform. Enterprises or individuals that have obtained a tobacco monopoly retail license and are qualified to engage in e-cigarette retail business shall purchase e-cigarette products at local e-cigarette wholesale enterprises.
On April 13, the State Administration for Market Regulation and the relevant departments of the State Tobacco Monopoly Administration revealed that from June 15, 2022, e-cigarette-related production enterprises, wholesale enterprises and retail market entities that have obtained tobacco monopoly-related licenses will gradually trade on the platform.
Zhao Yangbo previously told Shell Financial Reporter that in the past, e-cigarette brands did not have a particularly strict form of sales, some through micro-business, some through specialty stores, and some through investment exhibitions. "This provision is equivalent to the brand side can not directly sell e-cigarettes to anyone in the future, may be the future sales behavior will be handed over to the wholesale enterprises as the main body to do, the vast majority of dealers in the market also need to trade with enterprises with wholesale qualifications, rather than directly from the brand side to take goods."
In Zhang Yi's view, e-cigarette sales through the national unified construction of the trading platform, funds, commodities, taxes three-rate unification, collusion, price chaos, counterfeiting, tax evasion and other chaos will be eradicated.
However, Zhao Yangbo added, "Not all stores can successfully obtain e-cigarette sales licenses, which will also cause a number of e-cigarette stores to close." Shell financial reporter noted that the ninth article of the "Several Policy Measures (Trial)" stipulates that the competent administrative department of tobacco monopoly under the State Council shall guide the provincial tobacco monopoly administrative department to formulate the layout plan of e-cigarette retail outlets. Each provincial-level tobacco monopoly administrative department is responsible for formulating and implementing a reasonable layout plan for e-cigarette retail outlets within its administrative region. The layout planning should conform to the local market demand and the characteristics of consumer group agglomeration.
The staff of the above-mentioned YOOZ e-cigarette store told Shell Financial Reporter that many stores are now facing difficulties in applying for retail licenses, and as long as the documents are done, they can operate normally. "We are also in the application process, by the company unified, after the May Day holiday will be officially processed."
Article 20 of the Administrative Measures also stipulates that enterprises or individuals that have obtained a tobacco monopoly retail license and are qualified to engage in e-cigarette retail business shall not exclusively operate e-cigarette products for marketing and sale.
"In the future, there will be no specialty stores, only collection stores, and there is no franchise, if our family continues to open the business license, there will be several brands in a store, and it will not be like this, such as opening a YOOZ next to it and opening a yue carving next door." There will also be a distance restriction between stores and stores. "The staff of the above-mentioned YOOZ e-cigarette store told Shell Financial Reporter that YOOZ will cooperate with a number of e-cigarette brands such as Yueke, Xuejia, Fluke, and Ono to open a collection store." The collection store must have hoarded more goods and pressed more money. If you want to make money, it is definitely more profitable than the store, because its customer base is wider. ”
Fang Hui, partner and CMO of Bode, previously said that non-exclusive operation means that brand stores will become a thing of the past, replaced by all collection stores. "This will have more opportunities for a single brand to reach consumers. However, the product competition of various brands will also be more direct and fierce. ”
Zhao Yangbo said, "In fact, more of a transaction party has changed, the original retail points are directly to the brand to place orders, and now to wholesale enterprises to buy goods." From this point of view, the wholesale circulation of e-cigarettes will change greatly in the future, and the form of retail in the terminal is only one aspect. We feel that there may be some new changes in this regard as compliance and market exploration progress. ”
Beijing News shell financial reporter Sun Wenxuan Editor Chen Li Proofreader Jia Ning