A customer examines caps for smokeless tobacco devices at IQOS Store Ginza in Tokyo. (Photographer: Akio Kon/Bloomberg)

Hong Kong Bans E-Cigarettes in Latest Blow for Big Tobacco

(Bloomberg) -- Hong Kong is banning alternative smoking devices -- the latest setback to the tobacco industry’s efforts to find growth markets as cigarette demand shrinks worldwide.

In a surprise reversal, Hong Kong will impose a ban on e-cigarettes, a next-generation category of smokeless tobacco products, Chief Executive Carrie Lam said in a policy address Wednesday.

Hong Kong joins at least 27 countries that have banned next-generation smokeless devices, heeding advice from the World Health Organization. The products have come under fire from health officials across the globe because of concerns about their appeal among youth. The backlash is bad news for tobacco companies, which are investing billions of dollars in developing products that could move the industry beyond cigarettes.

"Without doubt, the tobacco industry is strong at lobbying," Lam said at a briefing after her address, adding that she’d received 3,000 letters this year against an e-cig ban. "But we have to do what’s right for young people’s health."

Hong Kong Bans E-Cigarettes in Latest Blow for Big Tobacco

A legislative proposal this June had outlined regulating e-cigarettes the same way as conventional tobacco in Hong Kong, including restricting their sale to minors, and prohibiting advertisements and sponsorship.

“It’s unfortunate that the government decided to reverse its earlier balanced decision to allow and regulate these products in line with the international trend,” Philip Morris International Inc. said in statement Wednesday. “We firmly believe that concerns regarding youth access can be better addressed through appropriate regulation and education.”

Tobacco makers were looking to Hong Kong as a potential market for alternative devices. Philip Morris said it doesn’t sell any of its new tobacco alternatives in Hong Kong, while Japan Tobacco Inc. said it only sells paper cigarettes in the territory.

“A full ban of e-cigarettes will only make black market business more popular, not help to protect teenagers under 18 years old and consumers,” the Coalition on Tobacco Affairs, an industry group, said in a statement Wednesday. It added that none of its members is selling e-cigarettes or heat-not-burn devices in Hong Kong.

Japan Tobacco investors were unfazed by the news. Shares closed with a 1.2 percent gain in Tokyo Wednesday. The stock is down 19 percent this year, while Philip Morris shares have tumbled about 27 percent from a peak last October.

The move comes as Big Tobacco companies have been increasingly pressured by tighter restrictions on smoking and the sale of cigarettes around the globe. In the U.S., the largest market for e-cigarettes, regulators have recently taken a more severe stance on the devices after raising the alarms on their use by children and teens. The U.S. Food and Drug Administration said it’s considering banning flavored versions of nicotine devices. Last month, it seized documents from Juul Labs Inc., which offers sleek e-cigarettes with flavors that appeal to underage users.

While some countries have taken a combative stance against e-cigarettes, others have looked to them as a way to curb smoking. Regulators in countries including the U.K. and New Zealand have backed the devices as potentially less risky compared to traditional cigarettes. Tobacco companies also tout what they claim to be decreased health risks of the devices.

Hong Kong has one of the lowest smoking prevalence rates in the world, and about 10 percent of the population smokes, according to Bloomberg Intelligence data.

©2018 Bloomberg L.P.