Tobacco Asia

28 tobaccoasia PRODUCT NEWS 产品新闻 energy consumption may face reductions or elimination of production capacity. Authorities will also tighten enforcement against export diversion, false customs declarations, and non-compliant products. Manufacturers must also separate e-cigarette production lines and approved capacity from those used for heated cigarettes and smoking accessories. The directive forms part of a broader regulatory cam- paign. In December, the State Council of the People's Republic of China called for a full-chain crackdown on illegal tobacco- related activities. Subsequent measures included tighter controls on e-cigarette production capacity, draft rules proposing a credit-based regulatory system, and the inclusion of nicotine pouches and other oral nicotine products under the tobacco monopoly system. JTI Warns on Japan HTP Tax Rise Japan Tobacco International (JTI) finance chief Vassilis Vovos told Reuters that a planned tax increase on heated tobacco products in Japan could slow market growth this year. The company plans to increase prices on its brands throughout the year to offset the impact. Heated tobacco products currently face lower tax rates than traditional cigarettes in Japan. A government proposal would eliminate that advantage and tax heated tobacco at the same level as traditional tobacco, which would drive price increases, Vovos said. "This increase is a significant one, and it could be in the area of ¥70-90," he said, referring to the effect on retail prices. He added that the rise could reach ¥100 (US$0.65) after sales tax. Lower prices have helped boost demand for heated tobacco products, and the tax change could slow growth in the category, Vovos said. However, he expects any impact would be temporary. JTI raised prices on its heated tobacco products by ¥30 (US$0.20) in January and plans to introduce smaller increases over the rest of the year to reflect the tax change, rather than raise prices all at once. The company reported strong financial results in 2025, with adjusted operating profit rising 23.5% at constant currency. Higher sales and pricing for traditional tobacco products and continued growth in newer categories, including heated tobacco and vaping products, supported the increase. Ploom, which JTI views as a key source of future revenue, recorded volume growth of more than 38% over the year. The device gained ground in Japan, where it captured a 14.4% share of the heated tobacco market. China Regulates Nicotine Pouches China's top tobacco regulator has issued its first formal rules governing oral nicotine products, bringing nicotine pouches and other smokeless tobacco items under China's state tobacco monopoly for the first time. The State Tobacco Monopoly Administration (STMA) dated the announcement January 6 and released it publicly on January 9, with immediate effect. The move clearly defines the regulatory status of oral nicotine products, which previously operated in a legal gray area, and marks a major shift in China's approach to regulating nicotine. Under the new framework, STMA defines "smokeless tobacco products" as nicotine-containing products consumed orally, nasally, or through external use without producing smoke. The definition explicitly covers nicotine pouches, oral strips and patches, snus, chewing tobacco, and snuff. Regula- tors have now formally recognized oral nicotine as a distinct product category within China's tobacco control system. The most significant provision concerns how authorities classify these products. STMA will regulate smokeless tobacco as either cigarettes or cut tobacco, not under China's e-ciga- rette rules. As a result, oral nicotine products will fall under the country's traditional tobacco monopoly system, which tightly controls production, branding, and distribution through state-run entities. The announcement also places smokeless tobacco products under China's "restricted" industrial policy category. This classification subjects factory construction, capacity expansion, and related investment to strict regulatory approval. Oversight will extend beyond product sales to manufacturing scale and capital entry. By aligning product definitions, regulatory classification, and industrial policy, regulators have fully absorbed oral nicotine products into China's existing tobacco production and control framework. Cigarettes and cut tobacco already operate under a highly centralized monopoly, and oral nicotine products will now follow the same structure. This shift could make it difficult for privately led manufacturing and branding models to survive in China's domestic market. As licensing rules, capacity allocation, and market access conditions change, the competitive landscape could face significant restructuring. For further information on this topic, please see the TA Q&A with Dr. Allen Liao on p.12-13 or visit https://www. tobaccoasia.com/podcasts/podcast_51_Allen_Liao_Tobacco- China/ for the full interview. JTI's Ploom device, a key growth driver for the company, saw volumes rise more than 38% over the year, reaching a 14.4% share of Japan's heated tobacco market. Credit: JTI.

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