China has joined a handful of countries in banning flavored vapes to curb the use of nicotine by minors. From October 1, e-cigarette companies in the country will only be allowed to sell tobacco-flavored vapes, an effort by the government to “standardize” the production, sale and consumption of the new tobacco product.
China’s e-cigarette makers experienced a short-lived boom before regulators began reining in the lucrative industry about three years ago. At first it was a ban on the online sale of vapes. Then, in May of this year, a series of comprehensive regulations entered into forceeffectively subjecting e-cigarettes to the jurisdiction of the Chinese tobacco authorities.
The ban has been a long time coming and investors anticipated the change. Relx, which owned 70% of the Chinese pod vape market as of 2020, has lost more than 95% of its share value since its debut on NYSE in January 2021. Shenzhen, have fallen by 90% since reaching a record high in January 2021.
A ban on flavored vapes is the death knell for the vaping industry. Tobacco-flavored products accounted for only an insignificant portion of e-cigarette sales, according to a questionnaire conducted by Landong, a Chinese media publication focused on the vape industry.
Other key regulatory measures include a tobacco tax on e-cigarette sales and strict new requirements for how a vape is made, from the battery, ceramic coil and nicotine content to fragrance. Meeting all of these criteria can cost a fortune, meaning the shoddy, filthy type of vape sellers that used to crowd the market will struggle to survive.
Well-funded Chinese vaping startups like Relx and Myst have long embarked on international expansion to diversify their revenue streams. In 2020, Relx started the costly and time-consuming ordeal of getting FDA approval in the US. Myst, which was co-founded by a former Juul scientist, had entered Malaysia, Russia, Canada and the United Kingdom since May last year.
China’s approach to vaping flavors stems from the same concern shared by other jurisdictions: health risks to young people. In a notice from 2019, the country’s tobacco authority had this to say:
“The current electronic cigarette market in China is chaotic. The quality of products varies considerably, and a large number of them have safety concerns around unsafe additives, leaking e-liquid and bad batteries. In particular, some companies casually add addictive substances to alter the taste and color of e-cigarettes to make them more appealing, but this causes serious damage to the mental and physical health of underage users.”
In 2019, the US government prepared for a policy to ban flavored e-cigarette products. In June, European Union lawmakers propose to ban flavored heated tobacco products. As the world’s largest producer of vaping devices, Chinese e-cigarette factories are likely to see their demand shrink as regulators around the world continue their battle with the vaping industry.