China calls for businesses to shut down e-cigarette online shops (updated)

China Tobacco International (HK)

01/11/2019 10:14

* Tobacco regulator urges removal of online e-cigarette
stores and
advertisements.
    * Calls for improved prevention of e-cigarette sales to
minors.
    * China home to over 300 million smokers, world's largest
tobacco
market.

 (Adds background, context, company comments.)
    By Josh Horwitz
    SHANGHAI, Nov 1 (Reuters) - China's tobacco regulator on
Friday issued a notice asking e-commerce platforms and
businesses to shut online stores that sell electronic cigarette
products, in a move aimed at stopping minors from purchasing
e-cigarettes through the internet. 
    The notice comes not long after online platforms and
retailers in the U.S. launched similar takedowns amid government
scrutiny toward vaping's effect on public health.
    It also arrives as a bevvy of Chinese startups race to
capture a piece of China's massive potential market for
e-cigarettes.
    The notice, which was dated October 30, was published one
day later on the website of state monopoly China Tobacco, which
is overseen by the country's tobacco regulator. 
    In order to "further strengthen the protection of the
physical and mental health of minors," the regulator "urges
e-cigarette producers, retailers, or individual sellers to
temporarily close online sales websites or channels" and "urges
e-commerce platform to temporarily close e-cigarette shops," the
regulator stated.
    China is home to over 300 million smokers, making it the
world's largest market for smokers.
    In recent years Chinese startups have taken venture capital
money and launched products with similar design characteristics
to those made by Juul - the e-cigarette company backed by Altria
Group Inc  MO.N  that swept the United States with its compact
form factor and potent nicotine salt formulation.
    Relx, founded by former employees of Uber China, and Snow+,
founded by a team of former bitcoin entrepreneurs, are among the
domestic market leaders. 
    The companies currently operate in a regulatory grey area in
China, as no national-level rules exist that provide standards
for the safe manufacture and sale of nicotine salt-based
e-cigarettes.
    Meanwhile, China Tobacco operates as a state-backed
monopoly, controlling the sale and distribution of all tobacco
products across the country. The unit also generates nearly 6%
of the country's total tax revenue, according to government
figures.
    In September, an official Juul online store briefly appeared
on Chinese e-commerce sites run by Alibaba Group Holding Ltd
 BABA.N  and JD.com  JD.O , only to disappear days later. Juul
and the retailers did not comment on the store's abrupt takedown
at the time.
    In a public statement, Relx said it will comply with the
regulator's notice and shut down its online sales channels.
Snow+ told Reuters it would comply with the regulations as well.
    Alibaba and JD.com did not immediately respond to requests
for comment.
    Over the past year, Walmart, Walgreens, and other American
retailers have pulled e-cigarettes from their shelves, following
a public health scare over their impact on minors.

 (Reporting by Josh Horwitz and Brenda Goh; Editing by Susan
Fenton & Simon Cameron-Moore)
 ((brenda.goh@thomsonreuters.com; +86 (0) 21 6104 1763; Reuters
Messaging: brenda.goh.thomsonreuters.com@reuters.net))