The steady roll-out of heat-not-burn products from Big Tobacco and a general growth in world vapour markets despite tightening regulation – those were the underlying big stories of the e-cigarette world in 2017, accompanied by new trends such as the rise and rise of shake and vape, and the increasing tendency to slap specific taxes on e-cig products.
The announcement that the French vape store chain Le Petit Vapoteur was the second fastest-growing private company in Europe was a clear indication of the direction of travel on that continent – while also hinting at consolidation in a country where smaller vape stores were going out of business.
In the UK, too, vape stores appeared to be bucking a gloomy trend, providing one of the few bright spots in a general picture of high street woe.
In the US, it was reported that e-cigarette sales grew between 2011 and 2015, while those of combustible cigarettes fell.
Though markets vary around the world, open systems now rule almost everywhere. The cigalike has perhaps had its day as manufacturers, retailers and vapers alike become more confident and more creative.
Regulation can drive creativity too. So it is that the European Union’s Tobacco Products Directive (TPD) has given an inadvertent boost to the practice of shake and vape. Adding a shot of concentrated nicotine liquid to a larger quantity of nicotine-free flavoured e-liquid is a way round the TPD limit of 10 ml maximum volume in a single bottle of nicotine-containing liquid. It’s a rapidly growing trend in France, Greece, Germany and elsewhere.
UK regulators told ECigIntelligence in July they would not prevent nicotine shots being sold together with zero-nicotine liquid. However, across Europe as a whole, interpretation of the TPD on this point was as mixed as a bottle of strawberry and lime – as our breakdown of the legal implications within the EU made clear in August.
Shake and vape e-liquids now account for more than half the available range of vapour products in some markets, according to recent ECigIntelligence research – and it’s likely to grow further. But a warning was sounded in November when an industry conference heard that shake and vape posed a threat to both health and the future of vaping – because unregulated nicotine-free flavoured e-liquids may be less rigorously tested, and therefore less safe, than liquids containing nicotine.
A friend of e-cigs
As January 2017 brought in America’s biggest political upheaval of our lifetimes, e-cigarettes may not have been at the top of everyone’s agenda – but there were hopes (even, perhaps, among some less than thrilled with the new regime) that the Trump administration would be good news for the vaping industry. Two high-level appointments fuelled those hopes.
When Scott Gottlieb was finally confirmed in May as head of the Food and Drug Administration (FDA) he appeared to live up to his billing as a friend of e-cigs.
“I think Congress had great foresight in envisioning the opportunity for reduced-harm products to transition smokers off combustible tobacco [and] onto reduced-harm products that pose less of a risk,” he said. He was still more supportive in a speech in July, when the FDA brought sighs of relief all round the e-cig industry by extending by almost four years the deadline for manufacturers to submit premarket tobacco product applications (PMTAs).
That move seemed to signify a change of official attitude, and 90% of US vape store owners we surveyed told ECigIntelligence in August they were optimistic about the future.
As the year went on, more deadlines were pushed back – those for product registration, listing of ingredients, and for comments on Philip Morris International (PMI)’s modified risk tobacco product application (MRTPA) for its IQOS heated tobacco device and consumables. There was some suspicion, however, that as the first two of those were 11th-hour extensions, and the other came after the FDA missed its own deadline for replying to PMI’s premarket tobacco application (PMTA), the agency was not so much relaxing its grip as losing it.
It remains an open question whether the FDA’s apparent new friendliness towards vaping will translate into product approval and more relaxed regulation.
US Representative Tom Cole ended the year much as he began it – hoping his provision to give the e-cigarette industry relief from the FDA deeming regulation might make it into a major federal spending bill.
The other of those promising Trump appointments was the replacement of Vivek Murthy as US surgeon general by Indiana health commissioner Jerome Adams.
Murthy had been criticised for a report on youth vaping which spoke of “a major public health concern” and danger to the adolescent brain. That may not have been a factor in his summary and unexpected dismissal in April, but when Adams was named in July as his successor, the outspoken advocate of smoking cessation was considered more likely to be a supporter of vaping.
Murthy’s influence outlasted his tenure as “America’s top doc”, however, as his report was thought to be a factor in a wave of local measures aimed at controlling e-cigs – such as the ongoing drive against flavoured e-liquids in San Francisco and Oakland; California’s proposed ban on vaping in public housing projects; New York state’s prohibition of vaping in schools; moves in several states and cities to raise the legal age for possession of e-cigs to 21; and a varied raft of tax proposals (see below). New York City revealed its full antipathy towards the rise of vaping with its plan to halve the number of e-cig sellers in each of the 59 districts.
A clear-ish Euro vision
Meanwhile in Europe, the European Commission in Brussels was becoming overwhelmed by the unexpected volume of e-cigarette product submissions – almost 150,000 of them by the end of June.
2017 was the year the TPD was at last transposed into law all across the EU. Spain, Sweden and Luxembourg were all late to the party, passing the directive into national law more than a year after the official deadline – Croatia crept in two days before the 20th May anniversary.
The first Europe-wide legislation specifically for e-cigarettes was meant “to improve the functioning of the internal market for tobacco and related products, while ensuring a high level of health protection for European citizens”. Even after its adoption by all 28 EU member states, however, the Euro-vision remains clear-ish rather than clear, with each national legislature interpreting the details of the TPD in its own way.
In Hungary, the most restrictive regime in Europe was reported in March to have forced some e-cig sellers to move to neighbouring countries. With distance sales of e-cigs and e-liquid banned at home, this meant they were all but giving up on their own country.
In Belgium, where the TPD came into force in January, nicotine e-cigs were freed from classification as medical devices, which had meant they could only be sold in pharmacies. It led to a rash of vape store openings across the country.
At the same time, Belgian health inspectors and customs officials set out to enforce the new rules strongly from the start – to protect both consumers and the legal market. The health ministry told ECigIntelligence in August: “Our main concern is protecting consumers and making e-cig products available from the official retailers as it is considered as a possible alternative to tobacco.”
Meanwhile, French firms were reported to be cashing in on Belgium’s ban on online sales.
In the UK – arguably the most vape-friendly country in the world – an ECigIntelligence survey in May found vape store owners upbeat following the country’s light-touch adoption of the European rules. Almost two-thirds reported that they had taken on more staff in the year since the TPD came into force.
By contrast, local e-cig associations in the Balkans reported gloomily that uncertainty over the new regulations was sending some vapers back to smoking. And in Italy, the year ended with parliament taking a distinctly harsher view of vaping, with a total ban on the online sale of nicotine-containing products emerging from a general battle over the regulation of e-cigs.
Taxation, taxation, taxation
The TPD, of course, covers a range of provisions, placing responsibilities on manufacturers, retailers, importers and exporters, advertisers – even, potentially, the owners of any premises where vaping may occur. But an area that remains confused – and highly contentious, not just in Europe – is taxation.
A look at some of 2017’s headlines alone reveals the battleground.
- Portugal halves e-liquid tax rate blamed for vape store closures
- Threatened vape stores play wait-and-see on Russia’s new taxes
- Estonia to tax e-liquids ‘to eliminate unequal competition’ with smoking
- Higher taxes ‘would force vapers back to tobacco’, users tell Europe
- Hungary abandons plans to increase tax rate for e-liquids
- Critics say Poland’s planned e-liquid tax ‘would destroy the legal market’
- Russia’s five-year plan to come down hard on tobacco and e-cigs
- Italy’s Constitutional Court rules that it’s OK after all to tax nicotine-free e-liquid
- EU-wide tax on e-cigs remains on back burner as report is delayed
In the US:
- California goes down route 66% tax on nicotine products
- New York governor proposes 10¢ per ml e-liquid tax ‘for public health’
- Rebels in two states refuse to give up the fight against e-cig taxes
- Kansas and Pennsylvania go their different ways on tax wrangles
- Delaware brings in e-liquid tax to help balance the books
- Aspen, celebrity ski resort, slaps 40% tax on vaping products
So, should e-cigarette devices be taxed, or e-liquids, and if so by how much? And for what precise purpose – to raise money, to discourage vaping, or (this seems the oddest one) to be fair to smokers? No wonder, perhaps, that the EU has decided not to decide for now.
At least the World Health Organization, not generally a friend to the vaping industry, is clear where it stands on that last point – as ECigIntelligence reported in August: “The WHO said governments should consider banning vaping indoors but use other strategies, such as high taxes on cigarettes, to encourage smokers to switch to vaping”.
Official standpoints across much of the world, often led by the WHO, tend to be more antagonistic towards e-cigs. While markets in Asia, for example, continue to grow, it is often despite increasingly restrictive regulation.
In Malaysia, as we reported in January, the trade, health and science ministries were given three years to draw up proposals for vaping legislation. The resulting uncertainty led e-liquid manufacturers there to look for markets abroad.
In Indonesia, too, the market has operated up to now in a grey area – so much so that the industry appeared to welcome moves towards regulation. In November, we reported: “Indonesia is to legalise the importation of nicotine-containing e-liquids – in order to reduce it.” The report concluded: “It appears the country is not about to join many of its Asian neighbours in banning [e-cig] products. Instead a licensing regime, coupled with taxation, will form the basis of the new regulatory regime.”
Singapore and Taiwan both appeared to be heading towards a total e-cig ban, despite warnings that this could contravene international rules laid down by the World Trade Organization. In December, Taiwan proposed an amendment to its tobacco control law that would prohibit the manufacture, importation, sale and advertising of all e-cigarettes.
In India, as ECigIntelligence reported in July, “vaping remains the preserve of a tiny minority, largely driven into back channels and online under the burden of confused regulations and over-zealous drug enforcement agencies”. In September, Jammu and Kashmir became the fifth Indian state to ban e-cigs entirely – yet in New Delhi, India’s capital, one young e-cig entrepreneur told us of his optimism for market growth.
In China, source of so much of the world’s e-cig hardware, research by ECigIntelligence suggested rapid expansion of a still tiny market, with the number of vapers doubling and market value tripling in a year. The seizure by Chinese customs agents of a reported 600 tons of smuggled e-liquid in October was taken as a sign both of that growth and the authorities’ determination to crack down on illicit trade.
Down under, paths diverged, with Australia and New Zealand taking increasingly polarised positions.
In Australia, where the domestic sale of nicotine-containing e-liquids remains illegal, a parliamentary inquiry was warned in August that tight regulation was creating a dangerous black market. In New Zealand, plans to legalise nicotine e-cigs and create an approval system for other reduced-risk products appeared to be going ahead despite a change of government. There were even calls from the country’s Maori Party not just to legalise e-cigs, but to subsidise them.
There is divergence, too, between Arab states – those in the North African Maghreb tending towards a European-style tolerance while those in the Gulf lean towards stern anti-vaping policies, as we reported in November.
And while South America “remains for now a minuscule market for e-cigarettes”, as we explained in June, “on the continent where tobacco originated, there is a smoking population waiting to be tapped” despite a patchwork of official bans and regulation that is strict in theory, if not in practice.
A growing share
Meanwhile, HnB products were big in Japan, where lighter regulation than applies to e-cigarettes was a clear aid to the roll-out of PMI’s IQOS, Japan Tobacco’s Ploom, and British American Tobacco (BAT)’s Glo. Those three, all with massive international resources behind them, were joined in the Far East market towards the end of the year when South Korea’s biggest tobacco company KT&G launched its Lil device on its home turf.
First in the market, and leading so far, IQOS has had a mixed reception globally – welcomed in South Africa, outlawed in New Zealand, tangled for now in red tape in the US, where PMI partner Altria is ready to spend huge sums on its eventual launch.
ECigIntelligence has detailed throughout the year how and where Big Tobacco has been repurposing factories to produce HnB products and how EU rules could give heated tobacco a marketing advantage over e-cigs. Those rules, however, could be set for a shake-up, with tighter regulation all round already being considered by the European Commission.
And with interest continuing in a variety of reduced-risk alternatives, R. J. Reynolds submitted modified risk tobacco product applications (MRTPAs) to the FDA in December for six forms of its Camel Snus product, which it is seeking to market in the US as reducing the dangers of specific smoking-related diseases.
As for the science behind it all – the attempts to answer the fundamental questions of personal and public health – the picture is no clearer than a year ago. Most studies are too small, too narrowly focused, and/or too politicised to be of much value.
Our health correspondent Marc Beishon summed it up in February with a review of two studies that seemed to offer conflicting conclusions: “While vaping is too new for its truly long-term effects to be visible in the population at large, any study that attempts a relatively long view of the health implications of prolonged e-cig use should be welcomed.
“These two studies are therefore a step in the right direction, though both…raise more questions than they answer. As with almost all studies of e-cigs’ effects to date, the common conclusion must be: ‘More work needed’.”
As ever, though, scare stories got more column inches than calm scientific assessments. And as Beishon again concluded: “Unfortunately, politicians as much as the general public are likely to read and react to alarmist coverage, which is therefore liable to have a disproportionate effect on policymaking.”
So that’s been 2017 – what of the brave new world to come? Is shake and vape really a time bomb ticking under the e-cig industry? And is Big Tobacco really intent on a smoke-free future? Watch this space.
– ECigIntelligence staff
ECigIntelligence does not provide legal, strategic or investment advice. Tamarind Media Limited, the publisher of ECigIntelligence, does not accept any liability or responsibility for information or views published.
Please see this page for a detailed description of our methodology. Please Contact us for a detailed description of our methodology.