Lev Grigori, Managing director of BABYLON, Russia’s largest compliant e-cigarette distributor, gave an exclusive interview to two Supreme Russian news centers. In the interview, Lev shared his views on the current state of the Russian e-cigarette market, as well as the impact of the new policy on the e-cigarette industry, and discussed the future development trend of the e-cigarette industry.
Regarding the current situation of the Russian e-cigarette market, Lev said:
Disposable e-cigarettes are the fastest growing category in the market, with an average annual growth rate of about 35%, of which 7,000 items are the most popular;
The second fastest growth rate is change-over electronic cigarettes, the development of this category is relatively stable, without much fluctuation;
The third is the open oil-for-bomb e-cigarette, which has a lower price. He believes that although the category is currently growing moderately, it is expected to develop well in the future;
The fourth is open electronic cigarettes, the current market share is relatively stable, by many mature consumers.
E-cigarette license applications are expected to be costly but will not be implemented immediately
On May 12, Russia officially adopted the “online ban, offline ban display” package of bills, part of the bill has come into effect on June 1; On June 1, the “Regulations on the Production and Circulation of Tobacco Products and Raw Materials in Russia” passed the second and third readings in the State Duma, and electronic cigarettes need to be imported and produced in the country. In response to a series of e-cigarette regulatory bills formulated in Russia, Lev believes that these new policies are conducive to promoting the legalization of the industry, but there is currently a problem of insufficient regulation.
Lev believes that obtaining an e-cigarette license is not easy, and the number of companies that can obtain a license in the future will be limited, and the cost of applying will become extremely high. In response, Mr. Lev points to some of BABYLON’s business experience. Lev said that when they were operating the JUUL e-cigarette brand, because a mango-flavored product needed to use alcohol, the government required them to obtain a liquor license, and the license was very expensive.
“Although there is no definite news at the moment, it is expected that the price of the tobacco license could reach up to one million rubles, considering the situation of the alcohol license.” Lev said.
However, he expressed optimism that September 1 is not necessarily the final deadline for the new policy, “the implementation of the new policy is a gradual process”, he said.
On the question of whether BABYLON, which has an online business, is affected by the “online ban”, Lev said that since 2020, Russia has banned the online sale of nicotine products, BABYLON has implemented a model of customers to buy online and pick up offline, which is not much different from offline purchase. However, there are still situations where lax regulation leads to online sales. Since June 2023, Russia has officially banned the online sale of e-cigarettes, and all BABYLON products have begun to implement offline self-collection mode.
Offline retail outlets oversupply Small retailers exit will not affect the market
When it comes to the risks that the Russian e-cigarette market may face in the future, Lev said that one is that the Russian government is likely to ban e-cigarette flavoring agents, the other is that the government may restrict or ban the use of nicotine salts, and the third is that the consumption tax on e-cigarettes will be increased, thereby reducing the number of consumers. He said: “If the government does not cut across the board, the market will continue to develop, but because the retail price of the product will rise, the growth rate of e-cigarettes will gradually slow down.”
But overall, Lev is optimistic about the future development of the Russian e-cigarette market. He believes that although legalization will make the gray customs market shrink, the overall sales network decline, and the unit price of the product rise, the total sales will increase because of the unit price increase. In addition, the current supply of offline retail outlets exceeds demand, and the withdrawal of surplus small retailers from the market will not bring too much impact.
In the end, Lev concluded, the development of the industry ultimately depends on the direction of policy in any case. For the clarity of the future development direction of the industry, it is still necessary to wait for the landing of relevant laws.