By Francis Allan L. Angelo
A sweeping new regional study has revealed a significant transformation in how Southeast Asians consume nicotine, with a clear shift from traditional cigarettes to alternative products such as e-cigarettes and heated tobacco devices.
The first-of-its-kind report, titled “Cigarettes & Alternative Nicotine Delivery Products: Product Usage & Consumption Behavior Study in Southeast Asia,” surveyed over 18,000 legal-age adults across Indonesia, Malaysia, the Philippines, Singapore, and Vietnam.
Conducted by Singapore-based consumer research firm Milieu Insight in September 2024, the study offers critical insights into consumption trends, flavor preferences, purchase channels, dual usage patterns, reasons for use, and anticipated future adoption of nicotine products.
The study’s data unequivocally demonstrates a regional move away from traditional cigarette smoking towards alternative nicotine products, notably e-cigarettes and heated tobacco products (HTPs).
Younger demographics, particularly those under 35, exhibit a lower prevalence of cigarette smoking but a significantly higher uptake of alternative nicotine products compared to older age groups.
The trend is particularly pronounced in Singapore, where alternative nicotine product use among the 21-29 age group is 44% higher than the national average, and in Vietnam, where the 25-34 age group shows a 39% higher incidence.
Gerald Ang, Chief Operating Officer of Milieu Insight, commented, “Our data shows that the younger population under 35 typically have lower smoking incidence but higher incidence of using alternative nicotine products than older age groups.”
The observation underscores a generational shift in nicotine consumption habits within the region.
While the widespread adoption of e-cigarettes is a relatively recent phenomenon, with the majority of users across the region initiating use within the last two years, alternative nicotine products have rapidly established themselves as a significant market segment.
In Malaysia, 12.2% of the adult population uses these products, while the figures stand at 9.5% in the Philippines and 5.4% in Singapore.
Importantly, the prevalence of alternative nicotine product use in these countries is nearing or even exceeding half of the incidence of regular smoking.
For instance, in Singapore, e-cigarette/HTP prevalence is 5.4% compared to 9.2% for regular smoking, in Malaysia it’s 12.2% versus 19.7%, and in the Philippines, it’s 9.5% versus 20.7%.
Dual users, individuals who both smoke cigarettes and use alternative nicotine products, demonstrate a notable reduction in their cigarette consumption, especially in Singapore and Vietnam, where such products are banned. Cigarette consumption by dual users in Singapore is 48% lower, and in Vietnam, it is 32% lower than that of regular smokers who do not use alternative nicotine products. This suggests that even under prohibition, alternative products are substituting traditional cigarettes, likely sourced through illicit channels.
The study also indicates a strong likelihood of future growth in the alternative nicotine product segment, with “a sizable proportion of smokers across the region indicate their likelihood to start using alternative nicotine products in the next 6 months,” according to Mr. Ang.
This anticipated shift suggests a further reshaping of the nicotine consumption landscape in Southeast Asia.
KEY FACTORS
Several key factors are contributing to the increasing popularity of e-cigarettes and HTPs. Flavor variety stands out as a primary driver, with fruit and menthol flavors dominating consumer preferences across the surveyed countries.
The perception that e-cigarettes and HTPs are “cheaper” than traditional cigarettes is another significant motivator for their adoption.
Ease of access also plays a crucial role, with consumers utilizing a diverse range of purchase channels. E-commerce platforms such as Shopee, Lazada, and TikTok Shops are prominent avenues for purchasing these products in Indonesia, Malaysia, and the Philippines. Social media and messaging apps are also important channels.
Notably, in Singapore, where alternative nicotine products are banned, messaging apps like Telegram serve as key platforms for acquisition.
Reasons cited by smokers for using e-cigarettes/HTPs while continuing to smoke include the desire to “reduce consumption of cigarettes” and to “prevent 2nd hand smoke”. The perceived lower risk and social acceptability of these alternative products may also contribute to their appeal, although the study does not explicitly delve into these aspects.
ILLICIT TRADE, POLICY CHALLENGES
Despite bans in Singapore and Vietnam, the entrenched presence of alternative nicotine products underscores a significant challenge: illicit trade. The lower cigarette consumption among dual users in these countries points to a shift from duty-paid cigarettes to untaxed, unregulated illicit products.
Chris Humphrey, Executive Director of the EU-ASEAN Business Council, warned of the potential unintended consequences of drastic tax policies on driving consumers towards the black market.
“Malaysia’s 55% illicit cigarette market is a cautionary tale — when a government imposes a sudden, excessive tax increase, it sends a price shock to consumers and push them to cheaper alternatives in the black market,” Mr. Humphrey said.
He added, “An excise policy with predictable and moderate tax increases can mitigate illicit trade, while achieving government’s public health and fiscal objectives.”.
In Malaysia, where regulations on e-cigarettes are being gradually implemented alongside a significant illicit cigarette trade, “strong enforcement of these regulations will be critical to curb non-compliant e-cigarettes from worsening Malaysia’s illicit trade problem,” according to Mr. Humphrey.
Robust regulatory frameworks and effective enforcement mechanisms is important in managing the market for alternative nicotine products.
The Philippines presents a different set of fiscal challenges related to its tax system for vape products.
Mr. Humphrey observed that the Philippines’ tax system currently taxes ‘freebase’ vapes 8.7 times lower than ‘nicotine salt’ vapes, leading to the misdeclaration of many nicotine salt vapes as freebase to exploit this tax gap, at the expense of government revenue.
To address this loophole, Mr. Humphrey noted that “The House Bill 11360 in the Philippines Congress is a step in the right direction to close this loophole by establishing a single tax rate for all vape liquids.”.
The proposed legislation aims to create a more equitable and effective tax structure for vape products in the Philippines.
For context, the current exchange rate is approximately PHP 1 Philippine Peso to USD 0.017, so an 8.7 times lower tax could represent a significant difference in cost and revenue.
COORDINATED, BALANCED POLICY RESPONSES
The findings of this regional study paint a clear picture of a rapidly evolving nicotine consumption landscape in Southeast Asia. The increasing popularity of alternative nicotine products, coupled with the challenges of illicit trade and tax evasion, necessitates a comprehensive and coordinated policy response.
The study’s conclusion emphasizes the need for intensified enforcement, cross-border collaboration, public-private partnerships, and more balanced policy design. These measures are crucial for mitigating illicit trade effectively while simultaneously achieving public health and fiscal objectives.
Policymakers and businesses operating in the ASEAN region must leverage these critical insights to navigate the dynamic landscape of nicotine consumption.
The “Cigarettes & Alternative Nicotine Delivery Products: Product Usage & Consumption Behavior Study in Southeast Asia” was conducted by Milieu Insight, an award-winning consumer research and data analytics company based in Singapore.
Fieldwork for the study was carried out online between August 8th and September 30th, 2024, involving over 18,000 legal-age respondents from Milieu Insight’s proprietary survey community. Milieu Insight aims to transform complex data into actionable intelligence, empowering organizations to make smarter, data-driven decisions.
The EU-ASEAN Business Council (EU-ABC) is the primary voice for European business within the ASEAN region.
Recognized by both the European Commission and the ASEAN Secretariat, the EU-ABC acts as an independent body dedicated to promoting European business interests and driving policy and regulatory changes that enhance trade and investment between Europe and ASEAN.
The EU-ABC is committed to advancing its members’ interests through strategic advocacy initiatives across various sectors and topics, striving to foster a sustainable and competitive business landscape in the ASEAN region.
