A press breakfast "The ENDS market: results of 2024 and prospects for 2025" was held at the site of OPORA RUSSIA, organized by the Union of Enterprises of the Nicotine-containing Products Industry (SPINI) together with OPORA RUSSIA. With the participation of key media outlets, the participants raised issues related to the main trends in the development of the core market, the results of the SPINI's work, the legislative regulation necessary to whitewash the market, the labeling of electronic signatures and the fight against counterfeiting. The event was moderated by Vladimir Michelovin, member of the Board of the SPINI, member of the Presidium of the Board of the NP OPORA Association.
Sergey Borisov, Chairman of the Board of Trustees of OPORA RUSSIA, began his expert presentation at the press breakfast. The speaker noted that the adoption of the bill on a total ban on electronic nicotine delivery systems (ENDS) will affect at least 150,000 small and medium-sized companies that are now legally operating in this market. OPORA RUSSIA believes that instead of bans, it is necessary to move to smart regulation and focus on combating the black market.
In support of this thesis, Sergey Borisov recalled the speech of Russian President Vladimir Putin during the lesson "Talking about important things" at the Kyzyl school: there is always a line beyond which prohibitions no longer apply.
"Vladimir Putin is absolutely right when he said that instead of prohibitions and restrictions, it is necessary to carry out comprehensive work. In recent years, the Government has taken a number of effective measures aimed at increasing the effectiveness of countering the illegal trafficking of nicotine-containing products. But we need to continue this work: to balance the excise tax rate, taking into account the limitation of nicotine concentration in the liquid for medical devices, to introduce reasonable requirements for market access through the registry model. The requirements should not be discriminatory, but they should be severely punished if market participants do not comply with them. Up to and including exclusion from the register for at least three years," Borisov said.
To whitewash the market, it is necessary to reduce excise taxes on social security funds. The speaker explained that the sharp increase in the excise tax on vaping liquids in 2024 led to a significant cost gap between legal and illegal products. In addition, the ratio of the excise tax rate on liquids for ESDS to the excise tax rate on cigarettes in Russia is now nine times higher than the average for other countries. Therefore, the share of counterfeit goods in this area has already increased to 95%.
The Chairman of the Board of Trustees of OPORA RUSSIA is confident that with the whitewashing of the market, the revenue of excise taxes to the budget will increase significantly. But to do this, it is necessary to prevent the adoption of initiatives that could destroy the legal market. For example, now one of the conditions for inclusion in the register of participants in the wholesale and retail turnover of tobacco and nicotine—containing products is proposed to set limits on the area of the sales floor - at least 25 sq. m in villages and at least 50 sq. m — in cities. This will only lead to a reduction in legal points of sale, and will only contribute to the growth of the illegal market, where product quality is not controlled and prohibitions on the sale of nicotine-containing products to minors are not respected.
German Lukashov, Director of the Union of Nicotine Industry Enterprises, spoke about the work of SPINI in 2024.
"The year was difficult and unpredictable for us, as 2-3 months before the end of 2023 it became clear that next year would begin with a sharp increase in the excise tax, by more than 100%. In 2024, licenses for importers and manufacturers were introduced. A minimum shipping price was introduced, ostensibly to limit the opportunities of "gray" and "black" players in the market. But, unfortunately, all these actions have led to the fact that the white market today in the segment of nicotine-containing liquids is no more than 5-7%. Many large players could not withstand the price competition with the illegal market and completely left the market, while medium and small players went into the gray zone. As a self-regulating organization, we participate in various expert councils, working groups established under government bodies at all levels, and cooperate with various medical and public organizations. We applied to the Higher School of Economics to conduct a special study on the optimal amount of excise tax on nicotine-containing products, taking into account all international experience. All scientific findings have been passed on to regulators for analysis and informed decision—making," said German Lukashov.
The Director of the Union also outlined the challenges facing the industry this year and in the foreseeable future. The most important thing is to achieve adequate regulation of the market, which should restore order and find a balance between public interests, the interests of the state and the business community.
We will continue to fight the threat of banning the entire industry, the sale of products to minors, counterfeiting and unscrupulous players.
Evgeny Fedotov, the founder of the first industry consulting agency in Russia, Fedotov Group, noted that in 2024, VTsIOM recorded an increase in the number of ESDN consumers for the first time in 30 years. Until this year, according to VTsIOM, the number of consumers has steadily decreased — over the past 5 years, they have decreased by 3.7 million people. This happened despite all the efforts made to reduce interest in smoking cigarettes, and contrary to the trends of recent years, when the number of smokers decreased slightly every year. He also stressed that according to VTsIOM surveys and Rosstat data, the number of e-cigarette consumers has already reached 10.5 million people.
"Vaping has already become not just a fashion, but a social phenomenon. It will not be possible to simply dismiss this phenomenon with a ban, since the consequences can be the most unforeseen. For the first time in the TOP 10 fears of Russians in the "National Anxiety Index. KROS" in 2024, there was a possible ban on vaping. That is, the 10.5 million adult consumers are most afraid that they will be denied access to these products.
The expert noted that the increase in excise taxes on nicotine-containing products has significantly outpaced the increase in excise taxes on other tobacco products in Russia in recent years: if the rate for cigarettes and heated tobacco increased by no more than 95% from 2017 to 2024, then the increase in excise taxes on liquids for medicinal products was 320% at once. And today, the ratio between excise taxes on liquids for electronic medicinal products and cigarettes in Russia is perhaps one of the highest in the world. Evgeny Fedotov drew the attention of the meeting participants to the fact that the global experience of banning drugs in Turkey, Thailand, Kazakhstan and other countries shows a significant increase in the illegal market and an increase in the sale of devices with excessive nicotine concentrations.
Director for the Protection of Legal Product Turnover at the Center for the Development of Advanced Technologies (Honest Sign) Maxim Kurgansky noted that the industry is being "whitewashed", and now it needs to be supported more than ever. At the same time, he noted that the "protective" principle of the excise tax on nicotine-containing products is already fully operational. The Honest Sign system, the digital labeling of products, already makes it possible to practically carry out quasi-licensing, since business entities are registered in the system, and the movement of labeling codes is monitored. Indeed, today, taking into account retail outlets, the number of business entities in the segment of nicotine-containing products reaches 170 thousand participants.
Maxim Shumilin, a representative of the industry, CEO of Eclipse Development LLC, spoke with a real example from business practice, who outlined the problem of double taxation. In particular, the entrepreneur was charged a tax of 12.5 million rubles a few months after the sale of a batch of legally imported products. The entrepreneur could not prove his good faith, and the situation turned into legal proceedings. The briefing participants agreed that this issue is widespread and needs to be addressed with increased attention.
Elena Dubankova, Director of Interaction with government Authorities and the Public of the SNS Group of Companies, member of the Presidium of OPORA RUSSIA, noted in her speech that the state has already created a powerful base for the de-shadowing of the ENDS market.
"Now, in order to achieve the intended goal, it is necessary to balance the excise tax rate on liquids for electronic medicinal products, eliminating any additional prohibitive measures and ensuring the softest possible entry (but with a hard exit for violations) in the form of a registry model to strengthen control of wholesale and retail trade. It is the large—scale illegal market that is the real cause of poisoning and the prevalence of vaping among minors. Legal businesses comply with the laws, including not selling tobacco and nicotine—containing products to children," Dubankova added.
Kirill Kuznetsov, Director of the Corporate Relations Department of the ITMS Group of Companies, agreed with previous speakers that restrictive measures on the electronic payment system market would only worsen the situation and lead to an even greater increase in the illegal sector. The speaker cited the negative experience in connection with the ban in 2020 on the wholesale and retail sale of smokeless nicotine— nicotine pads.
"Now the nicotine pads market in Russia is widely represented (offline and online) in the illegal zone: since 2020, the state's losses on excise and VAT have already amounted to about 96 billion rubles, the composition of products is not controlled, access by minors is uncontrolled. In this regard, it is necessary to approach the regulation of the electronic payment system market thoughtfully and in a balanced manner," the speaker emphasized.
In conclusion, the moderator of the meeting, Vladimir Michelovin, noted that the business community is open to dialogue with the government on improving regulation. We are confident that the systematic approach to solving problems outlined by Russian President Vladimir Putin is impossible without close dialogue and cooperation between regulators, public organizations, and industry representatives.
The expert noted that most of the problems are "man-made" in nature, when government regulation is either critically delayed where new markets are already fully developing, or extremely unweighted decisions are being made.
"Today, we urgently need to discuss optimizing the excise tax burden, improving licensing procedures (in the simplest configuration), restoring the entire range of unscheduled inspections and other initiatives aimed at comprehensive market regulation. It is necessary to use the potential of a bona fide business to combat the illegal market and to combat the sale of prohibited products to minors. Use the experience of other markets. For example, regulation and control in the alcohol markets," Vladimir Mishelovin summed up.
Source: