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Consumers will continue to increasingly spread usage out over different alternative nicotine products, partly driven by further, stricter vaping regulation coming in across the globe throughout 2022, ECigIntelligence predicts.
Usage will continue be determined by situation – for example, with pouches preferred in situations where exhaled substances would not be convenient – as a more holistic approach to nicotine is taken.
Vaping will also see further switches towards synthetic nicotine, primarily in the US but also potentially in other markets as a knock-on effect of US market influence. There will be continued growth in closed/disposable systems, due in part to innovation induced by the heightened US demand and tapping into consumers’ need for convenience and ease of use.
Synthetic nicotine will primarily be driven by the US market, where the rejection of the vast majority of premarket tobacco product applications (PMTAs) by the US Food and Drug Administration (FDA) has thrown the market into flux.
President Joe Biden’s nominee for the role of FDA commissioner, Robert Califf, who previously held the role during the Obama administration, is unlikely to alter this if his nomination is approved by the Senate. Known for having critical views of flavoured vape products, he is unlikely to prioritise the FDA’s review process given the many other health issues which will be on his plate, not least the continuing issues around Covid-19.
Companies vs the FDA
It should be noted, however, that the FDA has authorised one vape product (RJ Reynolds’ Vuse Solo model) for sale in the US, deeming it to be “appropriate for the protection of public health”. This is a huge step forward: if one product can obtain approval, then so can others. The FDA “determined that the potential benefit to smokers who switch completely, or significantly reduce their cigarette use, would outweigh the risk to youth”.
For those that were turned down, ongoing court cases will continue to appeal no matter what the initial verdict and more new cases will definitely be filed in the near term as companies fight the FDA’s handling. Enforcement against products on the market without authorisation is unlikely through the year but many companies have started and will continue to introduce synthetic nicotine equivalents to existing lines in preparation for pessimistic future scenarios.
Regulators are aware of this and a proposal has already been put before Congress which clarifies the FDA’s authority to ensure that products that contain synthetic nicotine can also be regulated, allowing the agency to implement this authority using the existing rules.
A huge growth in flavoured disposables and synthetic nicotine are the unforeseen consequences of this policy uncertainty in the US, together with new restrictions on flavours and other regulation at state level given the regulatory vacuum at federal level.
Moves towards synthetic and disposables will also be seen in other markets. The large-scale supply established for the US market demand means existing products will be pushed to other markets globally, where in many places they will find unmet demand for a simple-to-use, low-cost alternative.
Other markets around the world
In South Korea synthetic nicotine will continue to replace “stem” nicotine in existing, established brands. In Russia and Canada nicotine caps mean there has been a trend towards a hybrid nicotine freebase and nicotine salt mix which stays below the legal limit but has a stronger throat hit that mimics 30 or 50 mg/ml nicotine salt.
Battery innovation will also continue to accelerate as increasing capacity (now reaching 16 ml) in disposables requires a small but more powerful battery in order to last. Interestingly, regulators have also begun to notice the uptick in disposables in other markets and have acted accordingly. For example, in Belgium a bill that aims to ban disposable e-cigarettes has been notified to the EU Commission database.
Meanwhile, globally, ECigIntelligence predicts stricter vaping regulations are going to come in across multiple jurisdictions. These will range from flavour bans to higher tax rates to stricter marketing authorisation requirements.
For example, a tax directive at European level may bring in a minimum tax for all vape products in the 27 EU member states, while the political discussions in the European Parliament may well result in restrictions on flavours throughout the region.
The European Parliament’s Special Committee on Beating Cancer (BECA) has already given the green light to a cancer report that urges the Commission to assess a ban on selected flavours in upcoming regulations. This report, which it should be noted also says e-cigarettes “could allow some smokers to progressively quit smoking”, is expected to be voted in the plenary session in early 2022 but no date has been scheduled yet.
Bills introducing some limitation or outright banning flavours are also expected or already in some part of the legislative process in Belgium, the Netherlands, Canada, China, Iceland, Israel and Latvia – with some countries going even further, proposing total bans.
A taxing question
Some form of greater authorisation or registration for placement of vaping products on the market is expected in China, South Korea, Ukraine and Bosnia and Herzegovina. The Chinese government has confirmed that vaping products will be brought under the tobacco monopoly, and licensing will be controlled centrally.
The introduction of technical regulation is expected in Eurasian Economic Union (EAEU) countries – Russia, Belarus, Armenia, Kazakhstan and Kyrgyzstan – this year, while the Gulf Cooperation Council (GCC) Standardisation Organisation (GSO) could adopt the draft standard for electronic nicotine products too. Should this happen, it will trigger changes in countries with conflicting regulation already in place, such as Saudi Arabia; other GCC members are Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE).
Similarly, bills introducing some form of tax or increasing taxes on e-cigarettes are expected or already in some part of the legislative process in: Canada, South Korea, Spain and various US states. The US could also attempt a federal tax on nicotine – though that is unlikely to come about as a standalone bill, but is more likely to be a rider on a larger bill.
It is also important to note that the US Senate blocked a federal tax on vaping because it would be deemed to be regressive, particularly given that it would tax some vape products higher than combustible cigarettes.
There are some other potential positive developments to look forward to in 2022. For example, Malaysia is expected to table a draft law to regulate e-cigarettes in 2022, probably during the first semester (and then immediately propose a tax in the 2022 budget, but you can’t have everything).
In Poland a tax on vaping products may also be lowered. The excise duty forum, a non-binding forum organised by the government for the discussion of the excise duty on e-cigarettes and tobacco products within the industry, has recommended a significant reduction in the tax rate. Although meeting this request is unlikely, there is a chance the government may decide to lower the rate slightly.
Other nicotine alternatives set to benefit
And while China’s regulatory regime may bring in more restrictions – details of it are still not clear but should be revealed throughout 2022 – it is nonetheless better than the outright ban which has been discussed in the recent past.
Thus far, the State Tobacco Monopoly Administration has published a proposal on e-cigarette management stating that the tax on e-cigarettes will be implemented in accordance with national taxation regulations. No specific rate has been disclosed yet.
However, taken all together, the increase in regulation is likely to have a negative impact on the overall growth rate of the vaping market. ECigIntelligence predicts that heated tobacco and other alternative nicotine products such as pouches are most likely to benefit, particularly as our analysis reveals consumers do not tend to differentiate in many markets and tend to switch between products already driven by occasion or situation of use.
This is further backed up by the anticipated increase in availability of these products throughout numerous markets. Recent data from the US Centers for Disease Control and Prevention (CDC) showed that sales of nicotine pouches in the US have risen 300 times higher over the five years since they entered the US market in 2016.
The study, published in the Journal of the American Medical Association (JAMA), examined sales of nicotine pouches from March 2016 to June 2020, revealing that they rose from $709,635 in 2016 to $216.89m in just the first six months of 2020. The increase was from 163,178 units in 2016 to almost 46m units sold in 2020.This is expected to continue.
– Freddie Dawson ECigIntelligence staff
Photo: Gerd Altmann
