Home Business What to watch in the East | E-cigarette national standard solicitation draft released, optimistic about the medium and long-term development of the industry | E-cigarette

What to watch in the East | E-cigarette national standard solicitation draft released, optimistic about the medium and long-term development of the industry | E-cigarette

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Original title: Oriental Highlights | E-cigarette national standard solicitation draft released, optimistic about the medium and long-term development of the industry Source: Oriental Fund

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On November 30, the compulsory e-cigarette national standard solicitation was officially released on the national standard planning platform, starting the public opinion solicitation stage.

There are several differences between the draft for comments and the preliminary version in 2019:

First, the concentration of nicotine: it is required that the concentration of nicotine in the spray should not be higher than 20mg/g, which is close to the EU’s 2014 TPD requirement (20mg/ml), which is lower than the 3% concentration of mainstream products on the market. .

Second, the whitelist of additives: 122 substances are temporarily licensed for use in atomizing additives, which is a slight increase from the 2019 version of 119, including more “floral” additives, coffee/cocoa extracts, and low-sweetness fruit “citral” “. The taste standard of this draft is much more tolerant than that of the United States. To prevent young people from using it, high-sweet fruit flavors are excluded, but the adjustable flavors can cover more than 50% of the mainstream flavors currently on the market. The market has been worried about banning flavors. , So better than expected.

Third, synthetic nicotine: The draft for comments specifies that nicotine extracted from tobacco should be used, and the purity should not be less than 99%. Synthetic nicotine shall not be used for cigarettes in the future. China Tobacco will control the growth rate of the atomized cigarette industry by promoting the extraction of nicotine in the country. Fourth, other standards: e-cigarettes and cartridges that use e-cigarette liquid should have a closed structure to prevent artificial filling. That is, it is not allowed to sell open e-cigarettes in the country, and at the same time prevent consumers from adding illegal or harmful substances to e-cigarettes.

The Oriental Fund’s Equity Research Department believes that the release of this consultation draft is again faster than market expectations, indicating the strong regulatory status led by China Tobacco. Considering that incremental profit and tax targets and harm reduction attributes are the basis for the expansion of the industry, we are optimistic about the medium and long-term development of the e-cigarette industry, and follow-up the introduction of detailed license issuance in production and channel links. From the perspective of the industry chain, due to the impact of policies and licenses, it is expected that upstream flavors and fragrances and production companies will be less affected, while downstream brands and distributors will be more affected. The ability of private enterprises to supplement the existing China Tobacco system has largely affected the participation of private enterprises, and under the strong supervision of China Tobacco, leading companies bound to the China Tobacco system will benefit from the gradual introduction of relevant regulatory policies.

(Market risk, the investment need to be cautious)

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