The Ukrainian division of E-cigarette manufacturer JUUL has quietly begun to close its Ukraine office, but its addictive product still has the country hooked.
As of Jan. 2021, amendments to the tax code classified e-liquids as excisable goods, and therefore subject to hefty taxes, much like traditional tobacco products.
In protest of the decision, JUUL pulled all its products from shelves, unwilling to adapt to the new legislation.
JUUL aggressively exploded onto the Ukrainian market in 2019, lobbying members of the Ukrainian parliament, paying for celebrity endorsements, hosting lavish launch events, and availing concerns over the strength of their nicotine products.
Neither JUUL nor Ukrainian authorities, however, have stemmed the tide of sales of the currently banned products, which have now moved onto the black market, where minimal age-verification takes place.
Once labelled the “iPhone of e-cigarettes” for its sleek, USB-stick style design and accessibility, the product captivated an alarmingly young market, with over 40% of Ukrainian teenagers purporting to have tried e-cigarettes.
Much of JUUL’s success in the Ukrainian market came from its vast advertising budget, which it used to give the brand a trendy, youthful bent.
The company has faced international criticism for the high nicotine content of its products, and concerns that the product was falling into the hands of children.
Until the start of the year, children were able to buy vaping products in Ukraine with no age controls.
JUUL’s PR representative, in a statement to the Kyiv Post, stated that their local partners are contractually obliged to uphold age restrictions on their products.
They also state that they reserve the right to perform on the spot checks of any retailer to check that they are not selling vaping products to children.
“Any violators ultimately risk being unable to sell our product. Furthermore, with our partners, we have aligned on strict marketing guidelines,” the spokesman stated.
Recently, the Ukrainian government cracked down on JUUL’s advertising campaigns, banning advertisement in the media, in publications that target teenagers, and on public transport.
“Honestly JUUL was so popular because they poured millions into advertising. You had other smaller vape companies enter the Ukrainian market and leave shortly after because they couldn’t compete with this giant.” Notes Ilya, a vape shop manager from Kyiv.
Ukraine Gets Tough on Tobacco
In a law passed at the start of the year, liquids used in e-cigarettes were added to a list of excisable goods, harmonizing Ukrainian tobacco legislation and treating vaping liquids in the same way as other tobacco products. Ukraine will now charge excise duty on the vape liquids, irrespective of their nicotine content, at Hr 3,000 ($110) per liter.
The decision has prompted chaos in Ukraine, with JUUL pulling all its products from shelves. Lilia Olefir, Director of the Advovacy Center “LIFE”, a Ukrainian anti-tobacco advocacy center, stated that when the law was introduced at the start of the year, “there were no transitional provisions in the law.”
Products that were produced before Jan 1, 2021, in accordance with the amendments to the Tax Code of Ukraine, were considered unlabeled, and as a result, illegal, Olefir said.
When questioned on the company’s pull-out of the market, JUUL framed the closure of its offices as a part of its transition to establishing an “export model” in Ukraine, which it is also now doing in Russia, Italy, and the Philippines.
“Under this revised model, Juul Labs Ukraine will close, and Private Enterprise FTF will import and distribute JUUL products across approximately 9,000 Ukrainian retail outlets,” JUUL’s April 9 press statement reads.
A New Black Market
In the absence of official points of sale, a lucrative black market has opened up in Ukraine. Kyiv residents have reported being able to buy the untaxed e-liquid cartridges under the counter at some shops.
More notable are online sales, where the banned cartridges are sold openly. Large online retailers, such as Ukrainian retail giant Rozetka, Alishop, and other online vaping stores have continued to sell the cartridges, in breach of the new regulations.
The Kyiv vape seller noticed that online retailers continuing to stock JUUL products were doing so in violation of the law: “These are sold illegally – it doesn’t matter if its new or old stock,” he told our reporter.
“These JUUL vape cartridges, and many other nicotine oils, aren’t sold anymore because there is now an excise tax on them. This is the tax we see usually in the form of a pink or green sticker on cigarettes or alcohol bottles.”
Anti-Tobacco Legislation in Action
Olefir still views the new laws as a win for public health in Ukraine. “This regulation of the e-cigarette market is having a positive impact on public health policy,” she stated.
“It requires manufacturers and sellers to adhere to the rules of labelling, advertising, and distribution as was approved for traditional cigarettes, as well as to annually report to the authorities about the composition of such products.”
JUUL’s outreach in Ukraine shrank further thanks to additional stipulations to Ukrainian tax administration laws. From January 16, sellers of e-liquids were obliged to obtain the same licenses as used to sell tobacco products, leaving many retailers legally unable to sell vape products until they applied for new licenses.
This has further hurt JUUL and other vape manufacturers, as it has limited tobacco companies’ ability to rebound and get their products back on shelves in Ukraine.
Changes in excise duty and policy towards vaping has been replicated in many other countries. Italy, Hungary, Portugal, Greece, and the US all levy sizable excise duties on vape liquid.
JUUL has vowed to recapture the vulnerable Ukrainian market, on behalf of what it calls its mission to “transition the world’s billion adult smokers away from combustible cigarettes, eliminating their use, and combating underage usage of our products.”