A new financial filing by Alibaba subsidiary Zhejiang Tmall Network Technology shows the company has expanded its business scope to “electronic cigarette” sales, including online sales.
China is the world’s largest tobacco market, and presents a substantial opportunity for the “new tobacco” industry, which comprises non-combustion and electronic cigarettes. In a land of 350 million smokers—roughly one-quarter of China’s population—e-cigarette penetration stands at less than 1%.
Yet consumer backlash and an uncertain regulatory environment have prevented e-cigarettes sales from taking off in China.
Earlier this year, major Chinese e-commerce platforms, including Tmall, JD.com, and Suning, introduced sales restrictions and blocked search results for “e-cigarettes,” prompted by a news report by China’s state television broadcaster, CCTV, on the dangers of e-cigarettes.
Yet, media reports today say mandatory national standards around e-cigarettes in China have been reviewed and on the path to being approved. Alibaba, meanwhile, says the addition of this new e-cigarette business is normal enterprise conduct in line with China’s relevant laws and regulations.
Nevertheless, new tobacco is a rising industry in China, with sales of RMB 40 billion (USD 5.8 billion) in 2017, and growth wavering between 20% and 30% since then, per data cited by tech news outlet Iyiou.
And with 90% of global e-cigarette production based in China, it has another lever in place to propel explosive growth in its homegrown new tobacco space.
The country produced 1.21 billion e-cigarettes in 2016 and reached an estimated 2.2 billion in 2018, according to data compiled by the China Industrial Research Institute.