In Russia, there are a third more cigarette and vape stores with the same number of smokers
The number of stores selling electronic cigarettes has increased by 32% since March last year. In million-plus cities, there are already more of them than classic tobacco shops. At the same time, the number of smokers in the country is stable
The Russian segment of retail, specializing in the sale of tobacco products and electronic nicotine delivery systems (ENDS) - electronic cigarettes and vapes, grew by a third over the year. In March, the number of stores specializing in the sale of electronic cigarettes in Russian cities with a million population reached 16.9 thousand points - compared to the same month in 2022, their number increased by 32%, following from the data provided at the request of RBC by the 2GIS mapping service.
As considered
2GIS specialists evaluated the number of stores and points of sale in two categories, depending on which goods prevail in their assortment. The category "electronic cigarettes" includes stores and points of sale that definitely sell electronic cigarettes. The category “tobacco products” includes stores that sell cigarettes and any tobacco, but not necessarily electronic cigarettes - ENDS may be in the range of such stores, but experts do not have information on the number of such outlets.
The largest increase in the number of stores selling vapes and electronic cigarettes over the year was recorded in Volgograd (plus 56%, a total of 792 outlets in March), there were almost 50% more of them in Ufa - 517 outlets. In the same period, the number of such points of sale in Moscow increased by 32% to 4.1 thousand stores.
Retail specializing in electronic devices for smoking has been booming for the past two years - at the beginning of December 2021, there were three times fewer such stores in Russia - only 5.2 thousand. Now their number exceeds the number of stores that define themselves as classic tobacco retail: according to 2GIS, in March there were 14.6 thousand of them in million-plus cities (that is, 13.6% less than stores selling electronic cigarettes). In the year since March 2022, the number of tobacco shops has also increased by 30%.
However, the assortment of most tobacco outlets already includes electronic cigarettes: today there are almost no traditional cigarette stores that do not sell ENDS or tobacco heating systems, Anton Belykh, CEO of DNA Realty consulting company, points out. “This is the market reaction to the growth in consumption of such products. In 2021, entrepreneurs found a niche, and this is such a profitable story that they stopped considering the concept of healthy competition and rental prices in successful locations,” Belykh describes.
Have Russians started smoking more?
Despite the growth in the number of tobacco and vape shops, the share of smokers in Russia has remained almost unchanged over the past five years. According to VTsIOM polls, this is a third of the population. In January, the Ministry of Health cited data from Rosstat, according to which the proportion of smokers is declining: if in 2009 the prevalence of smoking among men and women was 39%, now it is about 21%.
The decrease in the number of smokers recorded by Rosstat could be the result of the transition of some consumers from cigarettes to innovative products, admits a representative of the International Tobacco Group (formerly Imperial Brands, which produces the Davidoff, West, Jadé, P&S, Maxim brands and myblu electronic nicotine delivery systems). At the same time, the International Tobacco Group notes that there is still a high demand for tobacco products in Russia.
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How the economy of electronic cigarette stores works
In places with high customer traffic, points for the sale of vapes and other ENDS can open “door to door and in large numbers,” Belykh points out. The area of such stores is larger than that of traditional tobacco retail, which previously chose premises of 7-10 square meters. m. The business associated with vapes and electronic cigarettes chooses premises from 10 to 30 square meters. m, with an average rental price of 5-15 thousand rubles. per square meter per month.
Experts and market participants explain the sharp increase in the number of stores selling vapes and electronic cigarettes by the fact that, unlike traditional tobacco retail, this segment is less regulated by law, and the margin of the product is higher. “In the tobacco market, business is always under the sight of regulators: you have a clear product, distribution networks, and smuggling and counterfeiting are obvious,” explains one of the participants in the tobacco industry. “In ENDS, the majority do not pay excise, the authorities do not always understand whether the product is legal, and pricing and marginality are in the hands of entrepreneurs.”
In the second half of 2022, the share of illegal nicotine-containing products on the Russian market could reach up to 79%, and in liquids - 93%, the Ministry of Industry and Trade reported, citing research data from the National Scientific Competence Center in the field of combating illicit trafficking in industrial products (NSCC). According to research company NielsenIQ, electronic cigarettes make the biggest contribution to ENDS sales dynamics: in the 12 months to February inclusive, their sales in pieces increased by 37% year-on-year, and in monetary terms - by 63% (researchers do not give absolute figures).
Vladlen Maksimov, president of the Association of Small Format Trade, agrees with the opinion about much less control of this market. The profitability of ENDS sellers reaches 200–400%, while in the tobacco industry, due to the maximum retail price, it is 5–10%, Belykh estimates.
How cigarette and ENDS sales are regulated
Since March 2019, Russia has introduced mandatory labeling of cigarettes designed to combat illegal products: manufacturers, importers, and sellers must submit information about tobacco circulation to the Chestny Znak national labeling system. The circulation of unmarked cigarettes and cigarettes is prohibited from July 1, 2020.
Mandatory labeling of liquids for electronic nicotine delivery systems in Russia has been introduced since December 15, 2022, but so far market participants are only connecting to the system and can sell unlabeled leftover products. Information about the circulation of goods (marking also applies to nicotine and nicotine-free liquids in cartridges, capsules, as well as disposable electronic cigarettes) should be submitted to the Chestny Znak system for the time being by manufacturers and importers. Wholesalers and retailers will connect to the system from April 1. And from December 1, the circulation of these goods without labeling will be prohibited.
The Tax Code also provides for excise taxes on vape liquids: since March 1, they have increased by 11% - from 18 to 20 rubles. per milliliter, from 2024 they will grow by another 5% - up to 21 rubles. The excise tax on cigarettes and cigarettes increases at a slower rate: from March 1 - by 2%, to 3536 rubles. for 1 thousand pieces, for 2024 - by 4%, up to 3678 rubles.
Vape shops have no preferences - the requirements for the sale of tobacco and nicotine-containing products are the same, but for ENDS, unlike tobacco, there are practically no legal requirements for quality and safety, says a representative of the International Tobacco Group. “Basically, numerous vape shops sell goods of unknown quality and origin with corresponding attractive prices,” RBC’s interlocutor points out.
What happened to the sales of nicotine products
According to a joint market review of the Chestny Znak labeling operator CRPT and NNCC:
in 2022, 7.73 billion conditional packages of cigarettes and cigarettes were sold - 0.17% less than in 2021;
among the commodity group "cigarettes and cigarettes" 99.95% are sales of cigarettes;
from March to December 2022, 446.2 million conditional packages of nicotine-containing products were sold. In the structure of sales, 99.9% falls on sticks (heated tobacco);
in the structure of sales of alternative tobacco products, the categories “tobacco for hookah” and “cigarillos” have the greatest weight. Of the 94.9 thousand conditional packages, they accounted for 67.5 thousand and 20.5 thousand pieces. respectively.
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