By Nattira Medvedeva
It would seem that South Korea is jumping on the e-cigarette bandwagon as more of its population turns to e-cigarettes instead of traditional tobacco cigarettes.
In January 2014, G-Market, Korea’s largest online shopping site, saw its sales of e-cigarettes at 10,000 units. Eleven months later that figure surged to 135,300 units. This was a 16-fold jump compared with its e-cigarette sales in December 2013. Lotte.com, another popular online shopping site, saw its e-cigarette sales increase by 18 times between Dec. 29 and Jan. 4 year-on-year. Customers in their 30s made up the largest portion their buyers at 41.7%. Data from the Korea Customs Service shows that imports of e-cigarette products jumped nearly seven-fold to ₩5.22 billion (US$4.76 million) during September-November 2014 compared with the same period in 2013. As of January 2015, the Korean e-cigarette market was estimated to be worth ₩50 billion, with about 2,000 types of e-cigarettes available, most of which are produced by small and medium manufacturers.
Even TV home shopping channels have embraced the e-cigarette trend. CJ O Shopping was selling the Doctor Stick device in January 2015. This was the first time the channel had featured an e-cigarette since 2012. Around 3,000 units were sold within an hour after the segment aired. Lotte Home Shopping channel launched its own e-cigarette device called the Last Stick and received increasing interest from buyers. Korea’s Ruyantech Technology new e-cigarette, VEIL Maxi-S”, sold out in just three days after it went on sale. Even convenience stores have been selling disposable e-cigarettes from Ecin Korea.
According to Jeong Seong Soo of AIDA Korea, a Korean e-cigarette manufacturer, e-cigarettes were introduced to the Korean market a while back, but became popular in 2011-2012. After that, the trend turned downward. “At that time, e-cigarette devices and liquids were not of good quality,” said Jeong. “And [the media] also broadcasted bad news about e-cigarettes without any survey reports. Because of these reasons, the domestic (Korean) market was shocked and many shops were shut down.” Contributing to the cause of this was a report released in 2012 by the Korean Ministry of Health and Welfare which said that e-cigarettes contain carcinogens, hormones, and unspecified levels of nicotine, and were no alternative to real tobacco cigarettes.
AIDA Korea was established in 2014 and has a manufacturing facility in Korea offering Korean-made e-cigarettes to both the domestic and international markets. It also has set up AIDA China in order to be more competitive in the Chinese market.
So what was it that caused Koreans to suddenly develop a strong affinity for e-cigarettes again, turning their backs on the tobacco cigarettes they had happily been smoking for years? The answer is the increased tobacco tax that kicked in on January 1, 2015. In September 2014, the Korean government announced a plan to raise the price of a packet of cigarettes by ₩2,000 (US$1.83) as part of an anti-smoking campaign. This pushed the average price of a packet of cigarettes up to ₩4,500. The new tobacco tax has caused cigarette prices to almost double.
Compare that price to that of e-liquids. Consumers can buy a 20-milliliter bottle of e-juice for ₩10,000-20,000 (US$9.00-18.00) online. Liquids containing nicotine, cost more at about ₩30,000. Considering that a 20 ml bottle of e-juice lasts longer than a packet of tobacco cigarettes does for most smokers, the draw is quite obvious.
A similar price rise for cigarettes had been introduced previously in 2004 at ₩500 per pack. That price rise saw the smoking rate drop to 50.3% in 2005 from 57.8% in 2004. Korea has a high rate of tobacco consumption – around 43.7% of men and 5% of women are smokers. With the new prices in place, the government hopes to reduce the country’s smoking rate, particularly of adult men which is one of the highest in the world, to 29% by 2020. The government also projected that the increased tobacco tax would lead to a 34% drop in the overall sales of tobacco products, and that it will generate an additional ₩2.8 trillion in tax revenue.
The higher tobacco cigarette prices created much mayhem, particularly in the last weeks of 2014 when smokers scrambled to stock up on their favorite smokes. Add to the higher prices the ban on smoking in bars and restaurants and the threat of fines for breaking smoking law that could go up to as high as US$4,550 and it is no wonder why e-cigarettes were suddenly back in favor with consumers. In September 2014, when the government announced the tobacco tax hike, G-Market sold around 25,700 e-cigarettes. In October, that figure changed to 63,700.
On the other hand, cigarette sales in Korea saw a sharp drop. KT&G, Korea’s largest cigarette manufacturer, saw its sales figures fall by half during the first week of 2015, compared to the same period the previous year.
When asked what challenges the Korean e-cigarette market currently faces, Jeong of AIDA said the lack of accurate information on e-liquid safety and quality, the need to find an alternative to nickel-chromium coils in the devices, and tax. “The tax is too high,” he said. “One milliliter of liquid nicotine is taxed at the same rate as a box of tobacco.”
Jeong, along with many other industry insiders and observers, also see strict government regulations as another challenge the Korean e-cigarette industry must face. They also expect that the direction in which the industry will be regulated will be intensely debated. Steps to develop e-cigarette regulations have already been taken by the government and members of the industry, but the outcome remains unpredictable.
Following its report in 2012, Korea’s Ministry of Health and Welfare remains firm on its position on e-cigarettes. It announced in early 2015 that e-cigarettes contain more carcinogenic substances than conventional cigarettes and that it will strengthen its monitoring of promotions and advertisements for e-cigarettes, along with increasing its efforts to educate consumers about the risks involved with using e-cigarettes.
The ministry will also start cracking down on TV home shopping channels that are selling e-cigarettes. The law allows the channels to sell products that help users quit smoking, which is how the e-cigarettes are being marketed. However, the channels are banned from selling tobacco products. The Ministry considers e-cigarettes the same as conventional tobacco cigarettes and has said that it will start fining TV stations up to ₩10 million for advertisements that claim e-cigarettes are not harmful or are an effective smoking-cessation tool. The ministry also plans to fine those who smoke e-cigarettes in non-smoking areas.
The ministry’s bureau chief of health policy, Ryu Geun-hyeok, has been reported to say, “Various similar carcinogenic substances contained in tobacco cigarettes were detected in e-cigarette vapor, so smokers must not consider them as a smoking-cessation device.”
Interestingly, the Korean government’s stance on e-cigarettes and how they are regulated has been the subject of ire and ridicule from the public, some even going as far as accusing the government of simply trying to fatten its tax coffers by monitoring e-cigarettes under the pretense of concern for public health, but doing so by constantly citing its research in 2012 instead of new studies providing more relevant and up-to-date data.