Q&A: IUOC’s Fox Guo and Jackie Zhuang

Tobacco Asia recently had the chance to talk about the current situation on e-cigarettes, vapor, and heat-not-burn products in China with Fox Guo, founder of IUOC, and Jackie Zhuang, a vapor industry consultant.

Tobacco Asia: How do you see the current [China] domestic market for e-cigarettes and vapor products?

Fox Guo: There is an existing market for heat-not-burn, traditional tobacco, and vapor. The market share for heat-not-burn is uncertain, but there will be a major market share in the future [for this product category].

Tobacco Asia: Is it a growing trend where consumers in China are increasingly turning to e-cigarettes and vapor products more than traditional cigarettes?

Fox Guo:  Take the Japanese market as an example. You can see now consumers are switching to heat-not-burn. That reflects equally to the Chinese market. We believe there will be still a market for both heat-not-burn and vapor products.

Tobacco Asia: What about regulations on e-cigarettes, vapor, and heat-not-burn products? What is the current situation?

Jackie Zhuang: The Chinese government has announced e-cigarette standards which will be imposed to the entire China vapor market. [These standards] will be imposed on e-liquids and e-vapor products, but not heat-not-burn. It’s actually a sign of the government stepping into the industry and the future of the private sector in this industry might be facing some pressure. So, instead of gaining an advantage from the upcoming regulation it might not be a good sign for the private sector. The future of this category is uncertain. But, heat-not-burn won’t be affected.

Tobacco Asia: So there’s no sign yet that there will be regulations on heat-not-burn?

Jackie Zhuang: The Heet stick contains tobacco. They’re always banned from import. China’s a tobacco monopoly. They will likely consider the number of foreign players, so there’s no foreign player in heat-not-burn consumables in China, as you already know. Heet are strictly banned in China, but IQOS can be legally purchased through e-commerce portals. The device has never been checked or imposed with any restrictions. IUOC has never had any pressure from the government because we don’t touch any consumables.

Tobacco Asia: We were talking about the regulations on e-cigarettes. When did that come about or when is it coming out?

Jackie Zhuang: It’s coming out, but the enforcement date is still unknown. I heard some sources say they need to report to WTO because this is related to trading matters with China’s exports. So they will file with WTO. I don’t actually know what they’re waiting for and the time frame of the WTO procedure is unknown to me. When the tobacco authorities will take control of e-cigarettes, timing-wise it’s unknown, but it’s the first time in history that e-cigarettes will clearly fall within the jurisdiction of China Tobacco.

Tobacco Asia: So the new regulations would be more focused on the manufacturing side? Or would it more affect Chinese consumers?

Jackie Zhuang: In general it’s a restraint on the product itself. It’s a restraint on the product specifications and for e-liquids it’s a restraint on the ingredients that will be used. So, naturally it would affect the trading side. For consumers it’s better protection but we still don’t know how it would affect consumers because the tariff measures are still unknown.

Tobacco Asia: Hong Kong recently adopted a ban on e-cigarettes, like a complete ban. How has that affected manufacturers in China, especially in Shenzhen where most e-cigarette manufacturers are?

Fox Guo: The banning of the general vapor products and heat-not-burn in Hong Kong does not affect IUOC. In IUOC’s stance it affects nothing.

Jackie Zhuang: Generally speaking, Hong Kong is such a small market that this banning does not affect anything and ideologically it’s not even a referral as Chinese consumers. [The manufacturers] don’t really care.

Tobacco Asia: Where do you see the vapor industry in the next five years, both in China and globally?

Fox Guo: There will be a pioneering effect from the IQOS category and there will be a market for mini-stick and heat-not-burn products. For e-vapor I have no comment as that’s not my field. For IUOC-type real cigarette heating there will be great opportunity because it features better cessation function.

Jackie Zhuang: I’m more of an e-vapor expert. I personally believe e-vapor will grow really fast overtaking heat-not-burn and the others. That’s what I expect. This is quite clear.

Tobacco Asia: IUOC produces these devices which are quite innovative. What other new, innovative products do you think we can expect coming out from China in the near future?

Fox Guo: Another innovative field to be launched in the market will be what they call the magnetic conduction technology.  [However,] the conduction is potentially risky to human beings because the radiation from the magnetic function is actually hazardous to consumers. [Currently, there’s] no way to eliminate that. We believe so far that’s the only technology that we are expecting that will pop-up in the market.