RUSSIA: Parliament Declares War on Tobacco Alternatives

Bottom line: There’s no difference between vapes and cigarettes in the government’s desires to reduce all tobacco product consumption.

By Eugene Gerden, TI Russia Correspondent

The Russian Parliament (State Duma) has taken aggressive steps against tobacco alternatives in Russia through the adoption of a new draft bill that equates e-cigarettes and other similar products with traditional tobacco products. In recent years the demand for traditional tobacco products in Russia has significantly declined. Instead, electronic analogues and other alternatives have experienced actively growing sales in the Russian market for the last 14 to 16 months.

According to recent statistics published by Russian media reports, Russian sales of traditional cigarettes has declined by 5 percent since the beginning of the current year, compared to January-November 2018.

In contrast, sales of sticks for electronic tobacco heating systems grew by almost 4.5 times compared to 2018, with the biggest demand being observed from Russian citizens living in the major cities of the country.

Analysts believe one of the major reasons for this has been “aggressive advertising” of electronic cigarettes and devices in the Russian media and TV.

In the meantime, the growing popularity of tobacco alternatives in Russia has sparked serious concerns from the Russian federal government and the national Parliament (State Duma).

So far, the Duma has approved a package of legislative acts to prevent a further raise of popularity of e-cigarettes and their analogues among the Russian population.

Perhaps the most important bill for the industry was approved on December 11 and equated electronic cigarettes, smoking mixtures and vapes with traditional tobacco products.

While sales of traditional cigarettes have been on the decline in Russia, the vape market continues to grow, as evidenced by thepopularity of consumer events such as VapeExpo Russia 2019.

Smile-Expo

The crucial point of the new legislative act is that it creates conditions for the reduction of consumption of both traditional tobacco products and electronic cigarettes. —Oleg Salagai, Deputy Minister of Health of Russia

The new bill legally defines the term “smoking of non-tobacco smoking products” and applies to them the same restrictions, as for traditional cigarettes.

In fact, the adoption of the bill became part of a major anti-smoking state Concept, which was approved by the Russian government at the end of November, with the aim to reduce the number of smoking people in the country within the next several years.

Commenting on the adoption of the new strategy, Oleg Salagai, Deputy Minister of Health of Russia said the crucial point of the new legislative act is that it creates conditions for the reduction of consumption of both traditional tobacco products and electronic cigarettes.

Manufacturer Response

In the meantime, global tobacco majors operating in Russia have already criticized the latest attacks of the Russian government on the alternative tobacco products.

Sergey Slipchenko, Vice President for Corporate Affairs of Philip Morris International, said that after four years of discussions between producers and the government about the role of alternative nicotine-containing products for the reduction of smoking in the country, the positions of producers have not been properly taken into account.

“Equating these products with traditional tobacco products puts an end to their further study and unlocking potential as a less harmful alternative for Russian customers,” Slipchenko said. “This in turn poses a serious threat for the achieving the targets stated in the concept for the reduction of the number of smoking people in Russia within the next several years.”

The same position is shared by Alexander Alexandrov, a Senior Manager for Regulatory Affairs and Government Relations of Imperial Tobacco in Russia and Central Asia.

“We are surprised that the products which are used in many countries to reduce tobacco consumption have been declared a new enemy instead of considering them as an additional tool to achieve the desired result.”

Imperial Brands PLC subsidiary Fontem Ventures launched its myblu pod-based vaping device to consumers in Russia in 2018.

According to Alexandrov, the reduction of the number of smokers among the adult population by 2035 to 21 percent will be quite difficult, given that almost the entire arsenal of prohibitive measures has already been put into practice by the state.

“We are surprised that products which are used in many countries to reduce tobacco consumption have been declared a new enemy instead of considering them as an additional tool to achieve the desired result.” —Alexander Alexandrov, Imperial Tobacco

According to producers, only the balanced and constructive approach to nicotine-containing products with lower risks could help achieve the goals of the concept.

Benefit for counterfeit?

Producers also believe the adoption of the latest state measures will also contribute to a further growth of counterfeit tobacco products in the Russian market. This year the share of such tobacco products continues to grow in the local market.

According to analysts’ predictions, by the end of the current year, their share in the overall structure of the market may reach almost 16 percent, almost 8 percent higher than in 2018. High popularity of

such products is primarily explained by their price, which is significantly than lower those for traditional cigarettes and tobacco products. Nielsen analysts estimate the level of budget losses due to tobacco counterfeit in the amount of up to RUB 100 billion (US$1.5 billion).

The average cost of a pack is RUB 115 (US$1.79), while in the case of stick, it is RUB 135.