The grey area in the Polish market for electronic cigarettes and e-liquids could reach 37.5%, according to a report for the VAP association. A considerable problem is the massive influx to Poland of cheap, disposable flavoured e-cigarettes, the real sales of which may be several times higher than official statistics and increasingly popular among children and young people. Increases in excise duties may also contribute to the growth of the grey market as surveyed e-cigarette users declare they would look for cheaper sources if prices rise.
“Electronic cigarettes are one of the top three categories in the tobacco market. The largest category is traditional cigarettes, which constitute over 90% of this market, while the share of e-cigarettes is about 2%, so it is a very small part, a niche in the market. In this niche, mainly Polish small and medium-sized businesses operate, and the entire production of these products takes place in Poland,” says Piotr Zieliński, President of the Business Rights Protection Association, to the Newseria agency.
E-cigarettes are electronic devices that heat up to around 200°C a liquid (e-liquid) containing nicotine, glycerin, propylene glycol and flavors, transforming it into an aerosol that is inhaled by the user. This market is rapidly growing: in 2021, the proceeds from the excise tax on e-cigarette liquid amounted to PLN 179.5 million ($47 million), in 2022 it was PLN 229.9 million ($60 million), and in 2023 it reached PLN 443.6 million ($116 million). However, with the development of the legal e-cigarette market, the grey area in this sector is also growing rapidly, as shown by the report “Grey Market in the E-Cigarette Market in Poland,” prepared for the Vaping Association of Poland.
“The main conclusion from this report is that the grey area in this niche e-cigarette market could reach as high as 37%, and that’s a lot. For comparison, in the market of traditional tobacco products, the grey area currently does not exceed 5%” – says Piotr Zieliński.
Under the current regulations, disposable e-cigarettes are not subject to excise tax and control by tax authorities do not cover either disposable e-cigarettes or refill cartridges for reusable e-cigarettes, only the liquid (e-liquid) contained in them. Statistics of the National Revenue Administration for 2021-2023 show that about 4.5 million ml of e-cigarette liquid without paid excise duty were revealed last year alone, and irregularities were detected in 32% of the 919 conducted controls. This alone indicates a large scale of grey area in the e-cigarette market.
“I believe that the grey area will have a huge growth potential for us, mainly because there are practically no special restrictions on the use of such products. Considering the declared behavior of market participants, it could be assumed that this grey area will greatly increase, as the degree of law compliance is relatively low among these people. In our studies about the e-cigarette market, many respondents declared illegal activities, such as searching for questionable distribution channels or using products in non-standard sizes banned by law. It turns out that only 18% of respondents did not display any of these behaviors,” explains Prof. Janusz Kudła from the Faculty of Economic Sciences at the University of Warsaw, co-author of the report.
The report collected data from 632 surveys carried out among young consumers of nicotine products aged 18-26. In this group, 17.5% declared that they buy e-cigarettes on distribution channels other than retail stores. Nearly 34% of respondents were looking for the ability to buy non-standard size e-liquids, in containers above 10 ml, and 46.5% were looking for disposable e-cigarettes that allow for more inhalations (above 800). Based on these data, experts estimated the total share of the grey area in the Polish electronic cigarette market at 37.5%, assuming that this is approximately the share of consumers involved, at least occasionally, in illegal purchases.
“What is also interesting is that out of 169 people, who were asked whether they had used this category of e-cigarette products before they turned 18, so when it is prohibited by law, as many as 168 people answered affirmatively, not having major objections to admit this,” notes Prof. Janusz Kudła.
Experts point out that the biggest problem is the massive influx of cheap, disposable flavored e-cigarettes that have been observed in the last years. According to Ministry of Finance estimates, based on customs declaration data, about 53.8 million of these devices were imported to Poland in 2023. Their actual sales may be several times higher than official statistics indicate – according to estimates from the Institute of Forecasts and Economic Analyses (IPAG), in 2023 it reached nearly 100 million units, with a net increase exceeding 300% (in 2022 the sales were 32.3 million units). Importantly, the attractive price (below PLN 30 / $8), wide selection of flavors and virtually uncontrolled availability mean that these disposable varieties are also popular among children and youth. There are also widely available products that frequently violate and break Polish and European laws.
Distributing illegal e-cigarettes, without any control or certification, often happens through online sales channels, such as illegal e-stores, auction portals or groups and accounts on social media. Their sales are also conducted through delivery directly to the indicated location or through illegal “sales networks” in schools and on large estates.
“E-cigarette users have plenty of opportunities to purchase these products outside our country, either by ordering or directly bringing them from abroad. And controlling such products is a problem for public administration bodies, which is an additional factor in promoting the growth of the grey area,” said the professor from the Faculty of Economic Sciences at the University of Warsaw.
According to experts, this will also be contributed by the excise duty increases recently introduced, which in turn will hit the legally operating part of the market. For e-cigarette liquid, the excise tax rate is set to increase by 75% next year, 50% in 2026, and a further 25% in 2027. In practice, these changes mean an increase in excise taxes on e-liquids from the current level of PLN 0.55 / $0.16 per ml to PLN 0.96 / $0.25 per ml next year, eventually reaching PLN 1.8 / $0.47 per ml in 2027. A 10 ml bottle of e-liquid will then be taxed at PLN 18 ($5), which will be a 327% increase compared to 2024.
“After the implementation of these drastic changes proposed by the Ministry of Finance, the excise tax rate for e-cigarette liquid will be one of the highest in Europe in Poland. For illustration, in Poland in 2027 this tax rate will be PLN 18 per bottle, while in Germany it will be about PLN 14 / $3.66, and in the Czech Republic – about PLN 8.50 / $2.23. If Polish consumers will pay more than in Germany, which is a very rich country, and much more than in the Czech Republic, which is our direct neighbor, this will create very uneven competitive conditions for entrepreneurs operating on the market in Poland,” says Piotr Zieliński.
As he points out, consumers will therefore stop buying legal e-cigarettes in favor of cheaper products purchased abroad or on the grey market. This is confirmed by the results of research conducted among users of electronic cigarettes.
“We have a very large group – over 40% of respondents – who declare moving to the grey area. We also must note that in the survey there were questions about what increase in price is acceptable for respondents, and it turned out that they agree to an increase of about PLN 5 / $1.3 per product. This means that the area of acceptance is very small, which may lead to consumers actually, in accordance with their declarations, moving to the grey area,” says Prof. Janusz Kudla.
The industry stresses that excise duty increases will not solve the problem of illegal and imported disposable e-cigarettes. On the other hand, they will hit the financial condition of legally operating small and medium-sized enterprises, which are the main producers of e-cigarette liquid in Poland. A sharp increase in tax burdens and consumers moving to the grey area will mean that most of them will have to lay off employees and cease operations.
“Already today, in the category of liquids for electronic cigarettes, Polish entrepreneurs face as much as 50% grey area. It is obvious that after the implementation of these plans we will have to struggle with the grey area reaching at least 70 to 90%, which has previously occurred in this industry. The question is then who will take responsibility for leading to this state and closing Polish companies,” says Przemysław Jaskóła, Vice President of the Vaping Association of Poland.
