Today’s show will be an eye opener since you will get a deep, deep dive into the vape market overseas, specifically China. See the long list of topics we covered below.
David Ettinger is a partner with the Keller and Heckman law firm in Washington DC, and he’s lived in Shanghai for 4 years and follows the market there every day.
There was so much information to cover that I asked him to keep going and we’d create a Part II and that’s what we did. This is part I, which speaks to the Chinese market primarily. VAPE radio show #86, which follows, expands into Japan, Korea, the Philippines, Malaysia, Australia, Russia and other areas as well.
What you’ll hear today:
- The Shanghai office has been open since 2004; David has been there since 2012
- His background is in food law and e-cigs and vaping was a necessary next step
- Quality control and regulations for e-cigs and vapor in China are lacking…
- The tobacco industry in China is a monopoly, run by the STMA and China National Tobacco Company (CNTC)
- They have complete authority to regulate production, sales, import, export, etc…
- China will be the largest economy in the world by 2018; 6% of their revenue is from tobacco taxation
- 350M smokers, 1 trillion cigarettes smoked annually in China
- Each province in China (about 34) has it’s own brand, overseen by the CNTC
- 7 of the top 10 brands worldwide are included in that list
- Exactly what that that monopoly controls is a big subject. Currently it does not include e-cigs, devices, juices, etc… They are outside their control. For now.
- One 5 sq. mile area of Shenzhen (near Hong Kong) has 600 e-cig producers, plus others that supply components and accessories. There is NO regulation of these “factories” which may be just a garage
- 95% of all e-cig products are manufactured there
- There is minimal to no quality control and some things, like paint, may contain heavy metals or contaminants
- This lack of QC may be behind many issues here in the US, but 5 years from now it will be more regulated
- The “definition” of tobacco in China may be expanded and include vape companies. Many will close.
- Who is the average Chinese smoker? Because smoking is part of their culture, children are exposed- and start- very young. 50% of all smokers worldwide are in China. Smoking around the dinner table is normal
- Air quality in China is a major problem and smoking is contributing to health issues and early deaths. It is similar to US lack of regulations from the 1960s
- Cigarettes are cheap in China, about $1.00 US
- Most e-cigs are made in China, but few have been used there. That is changing
- The sheer number of Chinese consumers can make them a bigger player than many large US companies
- Two years ago there were few vape shops in China, but they have increased and are impressive
- Is there a market in China for American products? Listen to David’s answer, but the next two years will tell the tale
- CQ: Cultural Intelligence. KNOW IT and understand it.