Starting September 1st, Russia will implement a new pricing policy for tobacco alternatives, which could cause the prices of e-cigarettes and related products to increase by up to five times. This regulation will establish government-mandated minimum prices for items such as e-cigarettes, e-liquids, and hookah tobacco.

Impact on Wholesalers and Retailers

Wholesalers and retailers dealing in e-cigarette products have already been informed of these changes. From September 1st, there will be a significant price increase as the policy enforces a minimum retail price for all tobacco alternative products. Selling these items below the established minimum price will be strictly prohibited.

Many in the market are calling this new measure a “prohibitive excise tax,” suggesting it may dramatically decrease the popularity of e-cigarettes, potentially causing many Russians to return to traditional cigarettes or quit smoking altogether.

Immediate Adjustments for Market Participants

Market players in the tobacco and nicotine sectors have been warned via private Telegram channels for store owners about the upcoming changes. All product prices must be updated by the end of August to comply with or exceed the minimum prices outlined in Resolution No. 301, dated March 14, 2024.

This week, a temporary, significantly elevated Maximum Retail Price (MRP) will be enforced. For example, a 30ml bottle of nicotine-containing e-liquid will have an MRP of 2,130 rubles, decreasing to 1,800 rubles starting September 8th.

Wide Scope of New Regulations

The new regulations will apply to all nicotine-containing products, including bottled liquids, pre-filled cartridges, and disposable e-cigarettes.

Under Article 7, Clause 6 of Federal Law No. 203-FZ dated June 13, 2023, the formula for determining the minimum prices of these products has been established by the government. This calculation is based on excise tax rates, VAT rates, and a specified multiplier.

Even with slight relief provided by Resolution No. 1050, the cost for consumers of nicotine products will still rise sharply. For example, the suggested retail price for bottled e-liquid (with or without nicotine) will be 60 rubles per milliliter or 1,800 rubles for a standard 30ml bottle. This is almost five times the current average price of around 500 rubles (according to the Honest Sign system).

Expected Price Hikes

By September 7th, the cost for the same volume of liquid will reach 9,504 rubles (1,800 rubles recommended retail price for 30ml + 10% distributor markup + 20% retailer markup = 2,376 rubles).

For pre-filled devices or cartridges, liquid prices will be set at 76 rubles per milliliter, making a 3ml cartridge cost 228 rubles. Disposable e-cigarettes will have a minimum liquid cost of 101 rubles per milliliter (e.g., a model with 10,000 puffs containing 14ml will cost 1,414 rubles).

Context and Broader Implications

It is worth noting that the minimum retail price for cigarettes in Russia was introduced on April 1, 2021 (108 rubles) and has been regularly revised since. The authors of this law argue that it has become a vital tool in combating the spread of illegal tobacco products, which accounted for over 11% of the market in 2020. The damage to the federal budget from unpaid excise taxes and VAT due to illegal tobacco products was estimated at 85 billion rubles. In 2024, the MRP is set at 129 rubles per pack.

Since January 1, 2011, Russia has also set a minimum retail price for cognac, vodka, and other alcoholic beverages over 28 degrees.

Excise Taxes and Legislative Developments

The excise tax for e-cigarette liquids containing 0.1mg of nicotine per milliliter will be 21 rubles in 2024 and 22 rubles in 2025. The excise tax for heated tobacco will be 9,016 rubles per kilogram in 2024 and 9,377 rubles per kilogram in 2025.

In late April, the State Duma discussed a proposal to ban the sale of e-cigarettes across Russia entirely. By the end of May, it was revealed that both the State Duma and the Russian government plan to tighten regulations on nicotine-containing products. This includes raising fines for smoking in unauthorized areas and imposing penalties of up to 7,000 rubles on parents of minors under 16 who are caught smoking.