Government ban drives e-cigarettes to black market

Hong Kong government is set to impose a full ban on the getting popular e-cigarettes and heat-not-burn cigarettes, and some legislative councillors believed that the policy would ruin the legal market and push the products into the black market.

E-cigarettes have become popular in recent years in Hong Kong as well as in the United States. According to The New York Times, 10.8 million adults in the U.S. are vaping e-cigarettes.

 

There is an increasing trend of smoking e-cigarettes in the world in recent years.
There is legislation about electronic cigarette and heat not burn cigarette recently.

 

“The growth of the global market for new smoking products maintains around 10 to 20 percent each year,” said Chris Wong, the owner of Vapeitonhk. His company sells related products of e-cigarettes and heat-not-burn cigarettes and has been operating the business in Hong Kong for three years.

E-cigarette market share on the rise

Several sellers and legislative councilors believed that the market for new tobacco products in Hong Kong has good potential. The overall prevalence of smoking in Hong Kong has continued to show a declining trend in 2018, according to a recent survey by the Department of Health. The number of daily electronic smoking devices users (including e-cigarettes and heat-not-burn tobacco products users), however, increased considerably in the last three years from no significant number recorded in 2015 to 5,700 persons in 2017, according to the Census and Statistic Department.

The Hong Kong Vape Association founded in 2015, which has about 100 members now, covers 50 shops, 20 wholesalers and 30 manufacturers of e-cigarette products, the SCMP reported.

The price of e-cigarette including tools is around $800. The price of heat-not-burn tobacco including tools is about. Thus, Mr Wong believed the profit was considerably higher than traditional cigarettes.

The total retail revenue is estimated at between HK$20 million and HK$30 million a year. Hong Kong also re-exports e-cigarettes made in mainland China and is estimated to be worth about US$10 million a month, the SCMP said. 

 

The electronic cigarette is the most common prototype of electronic nicotine delivery systems.
Heat-not-burn tobacco contains nicotine and other chemicals for users to consume

Meanwhile, e-cigarettes and heat-not-burn cigarettes attract tourists. “Many tourists ask me about domestic products of e-cigarettes and heat-not-burn cigarettes,” Mr Wong said. He thought Hong Kong should take its advantages to develop the potential market of e-cigarettes and heat-not-burn cigarettes.

What’s more, e-cigarette sellers said many traditional cigarettes smokers shifted to smoke e-cigarettes. According to the Hong Kong Council on Smoking and Health(COSH), the percentage of daily cigarettes smokers among all person aged 15 or above decreases continuously since 2004.

“Around 100,000 traditional cigarettes smokers have been changed to smoke heat-not-burn cigarettes in Hong Kong. The popularity of new tobacco products increases continuously.  In Japan, around 30% of daily traditional cigarettes smokers have changed to smoke heat-not-burn cigarettes in the past two years.” Peter Shiu Ka Fai, legislative councilor (Wholesale & Retail) said.

New policy affects market potential

The latest Policy Address stated that the government would submit proposed legislative amendments in this legislative session to ban the import, manufacture, sale, distribution, and advertisement of e-cigarettes and other new smoking products such as heat-not-burn cigarettes to safeguard the health of the public.

Mr. Shiu opposed the prohibition of the sales of e-cigarettes and heat-not-burn cigarettes. He thought that the use of e-cigarettes and heat-not-burn cigarettes is a global trend. Mr Shiu said, “The revenue from the tobacco market is around two to three billion in Hong Kong each year. Besides, the tobacconists seek to produce a healthier product, in order to satisfy the customers’ wants. ”

Government cannot prevent e-cigarette black market

Wong thought that even if the government bans e-cigarettes and heat-not-burn cigarettes, customers will buy them in the black market. There is a black market for traditional cigarettes. "How about the (black) market of e-cigarettes and heat-not-burn cigarettes, if they are officially banned? ” Wong asked.

Byron Tsang, Associate Professor at the Department of Economics, Virginia Tech thought the black market has already existed, and the prices of e-cigarettes and heat-not-burn cigarettes must rise dramatically if the policies are stricter.

Mr Shiu said that the government proposed to ban the sales of e-cigarettes and heat-not-burn cigarettes, but not ban the use of e-cigarettes and heat-not-burn cigarettes. Therefore, users will turn to the black market and thus boosts the prices of e-cigarettes and heat-not-burn cigarettes.

 

《The Young Financial Post 新報人財經》

新報人財經(TYFP)為香港浸會大學新聞系財經專業的實驗平台,由學生自主編採,為社會大眾提供中港相關的金融財經消息。

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