Billowing smoke from regulations clouding tobacco firms’ outlook
This article first appeared in The Edge Malaysia Weekly on November 10, 2025 - November 16, 2025
TOBACCO and electronic cigarette (e-cigarette) or vape companies in Malaysia hoping for regulatory relief are in for a disappointment as the schedule ahead indicates a new wave of restrictions, higher taxes and growing uncertainty about the future of the industry.
The Control of Smoking Products for Public Health Act 2024, which came into effect in October last year, was passed without the controversial “generational end game” (GEG) provision that would have banned cigarette sales to anyone born on or after Jan 1, 2007. The law marks the government’s first comprehensive attempt to regulate the fast-growing vaping sector, a move long sought by industry players themselves.
However, the period since its implementation has been anything but stabilising.
On Aug 1, Terengganu, Perlis, Kedah and Pahang joined Johor and Kelantan in officially banning the retail sale of vape products amid rising concerns about youth vaping. Perak is set to follow on Jan 1, 2026. Kelantan was the first state to introduce a similar ban in 2015, followed by Johor in 2016. However, the use of e-cigarettes remains legal in these states.
Last month, Malaysia introduced another round of regulations, rolling out new pictorial health warnings on cigarette packaging and imposing a retail display ban on both cigarettes and vapes.
Further downside risks are imminent as the Ministry of Health (MoH) has signalled there will be no let-up in its campaign against smoking and vaping. A nationwide ban on the sale and use of vapes is reportedly being planned for next year, starting with disposable vapes. The move potentially puts Malaysia in line with its Asean neighbours such as Singapore, Vietnam, Thailand, Brunei and Laos. However, critics question whether the government can navigate political sensitivities and industry lobbying to push through such a measure.
British American Tobacco (Malaysia) Bhd (KL:BAT) is already planning to withdraw its Vuse vaping product by the third quarter of 2025, after two years in the local market, amid tightening government restrictions on the segment. It is the only listed tobacco company on Bursa Malaysia.
This leaves Philip Morris (Malaysia) Sdn Bhd as the only “Big Three” tobacco company in Malaysia still selling its disposable VEEV NOW and cartridge-based VEEV ONE products, both launched in April 2024. Japan Tobacco International Bhd (JTI Malaysia) has yet to introduce any vape products in the country.
Ridhwan Rosli, secretary-general of the Malaysian Vape Chamber of Commerce, expresses disappointment at the crackdown on the vaping sector. “It seems the government is changing its policy every year, just as the previous policy is about to take effect,” he says.
Adding to the pressure, the federal budget announced on Oct 10 included an excise duty hike on tobacco — the first increase in a decade — as well as on heated tobacco products (HTPs). The last increase in tobacco excise duty in 2015 raised the rate by 42.8% and led to a surge in illegal cigarettes.
The latest excise duty increase caught JTI Malaysia, the maker of Winston, Camel, Mevius and LD cigarettes, off guard.
“It was a surprise in two ways. First, we didn’t expect the increase to happen as soon as Nov 1. Second, we noted that there was no corresponding rise in the excise duty on vape products,” says JTI Malaysia managing director Juliana Mohd Yahaya in an interview with The Edge.
Just days before the budget announcement, MoH reportedly proposed to the Ministry of Finance (MoF) a tenfold tax increase on vape liquids, from 40 sen to RM4 per ml for both nicotine and non-nicotine variants. However, the proposal was omitted from the budget.
Juliana says the company supports the government’s decision to resume tax increases on tobacco products after a 10-year freeze.
“It was a step in the right direction — a moderate increase after 10 years without any tax increase. But what would have been better is a comprehensive nicotine taxation framework,” she adds.
Under the new schedule, the excise duty on cigarettes will rise in phases, starting with an increase of two sen per stick, or 40 sen per pack of 20 sticks, from November. The tax on cigars, cheroots and cigarillos will climb by RM40 per kg, while HTPs will see an increase of RM20 per kg of tobacco content.
Juliana admits that JTI Malaysia had anticipated a smaller hike of between 20 sen and 30 sen per pack. “Still, the increase is moderate, which we appreciate. It’s not a 70 sen or RM1 hike, which would have been disastrous,” she says.
Malaysia’s tobacco tax currently accounts for 58.6% of retail prices.
The company hopes this marks the beginning of a structured and predictable taxation system, with fixed-rate increments. Even so, Juliana did not rule out that the absence of a vape tax hike in Budget 2026 could signal the government’s intention to phase out e-cigarettes entirely in the near future.
In September, Minister of Health Datuk Seri Dr Dzulkefly Ahmad announced plans for a staged ban on e-cigarettes, beginning with a prohibition on open-system vape devices and gradually extending to all types of vape products until the entire category is covered.
“I don’t think that’s going to happen immediately. In the meantime, the government could have raised vape taxes to boost revenue while working out the details of a potential ban. At 40 sen per ml, the current tax is far too low,” says Juliana, who believes the government is missing a major revenue opportunity by under-taxing vape products.
Between 2021 and July 2025, Malaysia collected RM288.45 million in taxes from vape products, significantly less than the RM15.02 billion generated from cigarette taxes over the same period.
“Even if vape taxes were raised to match heated tobacco, the government could significantly increase revenue,” she points out.
Still, she adds that JTI Malaysia does not support a full ban on e-cigarettes.
“Once you ban something, it becomes illicit. Look at Johor — vape sales have been banned for years, but vapes are still everywhere. Once the market goes underground, regulation and enforcement become impossible. At least with a regulated industry, we know who the legal players are,” she says.
“Trying to get information will also be challenging. If you regulate, at least we know these are the legal players that we can also monitor in that sense. But once you have a full ban, that’s it. There’s no visibility where they’re going to be, what they’re going to do.
“Reduced-risk products (RRPs) [including disposable vapes] that comply with applicable regulations and meet standards of quality, safety and manufacturing should not be banned. There is a growing global interest and demand for products with the potential to reduce the risks associated with smoking, as adults who smoke seek alternatives to traditional cigarettes,” says Ryo Yanagino, marketing and sales director at JTI in Tokyo.
“Some regulatory frameworks for RRP are modelled on combustible cigarettes and fail to recognise the harm reduction potential of high-quality products that do not burn tobacco or produce smoke. We strongly believe the regulatory framework for RRP should be proportionate to products’ potential to reduce risks associated with smoking. Regulation should not mirror that of combustibles [including packaging, display, ingredients, flavours and communication restrictions],” he tells The Edge.
Cigarette prices to rise from November
Following the government’s excise duty hike, tobacco companies are expected to pass on the higher costs to consumers. A 20-stick pack of premium cigarettes is set to retail at RM18.20, up 50 sen from RM17.70 currently.
“While the excise duty increase is 40 sen, there are other taxes to factor in as well. So the minimum that we have to increase the price is around 50 sen. By law, we’re not allowed to absorb the hike — it must be passed on to consumers,” Juliana explains.
The minimum price of cigarettes has remained at RM12 per pack since 2020. However, tobacco players are expecting the minimum price of cigarettes to increase in line with the upcoming increase in excise duty.
Despite the higher prices, Juliana expects the overall market impact to be moderate. “Consumers today have slightly more disposable income, thanks to the government cash assistance and higher minimum wage. Those using e-wallets may not even feel the 50 sen increase,” she asserts. “Some may switch to illicit cigarettes or vapes, but given the modest scale of the hike, we don’t foresee a major shift in consumption.”
The increase in the tax on cigars, cheroots and cigarillos is also expected to have minimal impact on JTI Malaysia as those categories represent a small portion of its business.
For HTPs, the excise duty increase of RM20 per kg of tobacco content translates into a 10 sen to 20 sen rise per pack, or roughly 2.5%, which Juliana describes as “manageable”.
JTI Malaysia is ramping up its push into the HTP segment through Ploom X, launched in January this year.
“The timing felt right. The Covid-19 pandemic changed consumer behaviour … people spent more time indoors and wanted a smokeless product that still delivered the tobacco taste, while being considerate to others around them. That’s also why vaping surged during that period,” she says.
“Amid a growing number of consumers looking for a choice where it’s smokeless and risk-reduced, that’s why we chose to launch Ploom X now.”
With HTPs currently accounting for only 2% of Malaysia’s total nicotine market, JTI Malaysia’s focus is not on taking market share from competitors but on expanding the category itself.
“For Malaysia, the HTP market is still in its infancy. Right now, we are still trying to understand what consumers want. Once we have that insight, we can then bring more heated tobacco stick flavours in,” says Juliana.
“We want to grow the segment through education. We will need to work together with Philip Morris to see how we can grow the category together by educating consumers on HTPs. Thus, it’s a slightly different approach that we are taking.”
Heated tobacco seen as growth driver as company navigates vape restrictions
Under Malaysia’s Control of Smoking Products for Public Health Act 2024, HTPs are categorised separately from e-cigarettes and vapes.
“It’s a different category altogether. Vapes have the lowest taxation, heated tobacco sits in the middle and conventional cigarettes are taxed the most,” says Juliana.
As JTI Malaysia doubles down on its HTP portfolio, the company expects growth to come primarily from existing smokers, that is, both exclusive cigarette users and “dual users” who consume both conventional cigarettes and e-cigarettes.
“Switching from cigarettes straight to vapes is a very different experience. Smokers want the taste of tobacco, whereas vapes are about flavours — there’s no tobacco taste in them,” she says.
If the government proceeds with its proposed vape ban, could HTPs benefit?
Juliana is not optimistic. “In reality, they’re more likely to turn to illicit vapes,” she says. “Vapes offer convenience — you can use them anytime, anywhere. HTPs, on the other hand, have a ritual: inserting the stick, heating it and using it in a specific setting. Those who prefer fruity flavours or convenience will still seek out vapes, even illicit ones.”
Price remains another critical factor. “Vapes are cheap because their taxation is so low. That’s why we need a comprehensive nicotine taxation framework to level the playing field. Otherwise, vapes will continue to slip through the cracks and even if banned, they’ll find their way into the market,” she points out.
The Illicit Cigarette Incidence Survey 2025 by the Confederation of Malaysian Tobacco Manufacturers found that illicit trade prevalence dipped slightly to 55% last year from 55.6% in 2023.
“If you look at illicit numbers, it’s been declining year on year to 54% as at July 2025, which is a good thing, right? But only about 30% of that volume returns to legal cigarettes, whereas the remaining 70% moves to vape. That’s a massive amount of lost tax revenue. So yes, it’s a huge missed opportunity,” Juliana stresses.
She welcomes the government’s recent efforts to curb the illicit trade, praising the Royal Malaysian Customs Department’s partnership with Mesiniaga Bhd (KL:MSNIAGA) to deploy product marking technology and digital enforcement tools.
“We believe that the introduction of this technology will help close critical loopholes currently being exploited by organised crime syndicates and counterfeiters. Initiatives such as these will help us in our ongoing battle against illicit trade,” she says.
When asked about JTI Malaysia’s plans for its tobacco brands such as Winston, Mevius and LD, Juliana says the company will continue to support these despite the retail display ban.
“All these brands have been in the market for a long time. Even with the retail display ban, because our brands are very strong, that will work to our benefit,” she asserts.
She adds that business is continuing as usual but notes that the ban could affect smaller stock-keeping units (SKUs). “Smaller SKUs or brands may gradually fade over time due to lower awareness. The ban will generally benefit the big brands, and we are in a very good position in that sense.”
Japan Tobacco bets on smoke-free future in ¥650 bil push into heated tobacco
Tokyo-listed Japan Tobacco Inc (JT Group) is doubling down on the shift towards reduced-risk products (RRPs) in an industry now convinced that the future of the nicotine market hinges on the success of non-combustibles or smoke-free products.
The global tobacco giant has committed ¥650 billion (RM17.7 billion) to its RRP segment for the 2025 to 2027 period, driven by its flagship heated tobacco line Ploom. The investment is more than double the ¥300 billion it spent on the category in 2022 to 2024.
“We plan to invest mainly in marketing activities, strengthening our product pipeline and driving innovation. We will prioritise investment in the heated tobacco segment under Ploom and target further market share growth for the brand, which is now available in 27 markets worldwide,” says Takayuki Shimomura, vice-president of investor and media relations at JT Group, in a briefing for foreign media in Tokyo.
JT Group launched its fourth-generation heated tobacco device Ploom Aura in Japan in May and has begun rolling it out globally.
The group operates across three major segments: tobacco, processed foods and pharmaceuticals. Tobacco, led by subsidiary Japan Tobacco International (JTI), remains the group’s core business, contributing over 90% of total revenue and profit, while its frozen food business holds a strong domestic position in Japan.
The group recently agreed to sell its pharmaceutical division to Shionogi & Co Ltd for about ¥150 billion.
Globally, JT Group employs more than 53,000 people of more than 100 nationalities, who operate 61 factories across its tobacco and processed food operations.
Shimomura says the group’s annual revenue topped ¥3 trillion, marking three consecutive years of record highs, and that another record is expected in the financial year ending Dec 31, 2025 (FY2025). Revenue is forecast to increase by 3.9% to ¥3.27 trillion this year from ¥3.15 trillion in FY2024.
Last year, JT Group acquired US cigarette maker Vector Group Ltd for US$2.4 billion (RM10 billion), expanding its footprint in one of the world’s largest tobacco markets.
“We will continue to consider mergers and acquisitions (M&A) where they make strategic and economic sense,” says Shimomura.
Through M&A-driven expansion and sustained brand investment, JT Group has become the world’s third-largest tobacco company. Its Winston and Camel brands rank among the top three globally by sales volume, with the former at No 2 and latter No 3.
“Now, we are taking on a new challenge, driving growth in the RRP category. RRPs have the potential to reduce the health risks associated with smoking,” he says.
While global cigarette volumes are projected to decline, industry revenue is expected to rise at an average annual rate of 3% until 2035, according to JT Group.
“Against that backdrop, the RRP segment is expected to see significant growth in both volume and revenue. Heated tobacco sticks (HTS) will likely deliver the most sustainable profit growth. And by 2035, we expect the category to account for about 22% of the global market,” says Shimomura.
“Given this outlook, we will continue investing in our traditional cigarette lines, which are expected to remain the largest category until 2035. At the same time, we will prioritise HTS as a strategic growth area and allocate resources accordingly.”
RRPs include nicotine pouches, vapes, infused tobacco and heated tobacco.
“To meet diverse consumer needs, we will continue to explore the potential of various RRPs. However, based on the market environment, our main focus will remain on HTS,” he says.
Over the next three years, JT Group expects high single-digit growth in adjusted operating profit at constant foreign exchange rates. This will be driven by robust pricing in combustibles, improved RRP profitability and contributions from the Vector acquisition, which will more than offset the higher RRP investment that it had planned, says Shimomura.
The group’s three-year tobacco strategy rests on two pillars: improving returns from combustibles and advancing its 2028 RRP goals through focused investment on HTS.
“For RRP, our priority is to reach a mid-teen share of the HTS market and to achieve break-even in the RRP business by end-2028,” he says.
Japan’s evolving tobacco market
As at November 2023, 15.7% of adults in Japan smoked regularly, according to its health, labour and welfare ministry. Combustible cigarettes still made up about 60% of the market, with RRPs accounting for the rest.
JTI’s share of the combustible segment stood at 61.8% between April and June 2025. In the first half of this year, RRP volumes rose 20.2% year on year, driven by a 29.5% increase in HTS volumes.
Following the launch of Ploom Aura and Evo sticks, Ploom’s share of Japan’s HTS market reached 13.6%, gaining momentum but still trailing Philip Morris International’s IQOS, the early market leader.
“We absolutely have the ambition to become No 1. We believe we have what it takes to compete and eventually overtake,” Ryo Yanagino, marketing and sales director at JTI in Tokyo, tells The Edge.
Yanagino says that in the Japanese market, the demand for combustible cigarettes is falling while RRP use is rising.
“In the near future, the share of combustibles and RRP is expected to reverse as the share of HTS in Japan has been growing significantly,” he adds, noting that the majority of people picking up the HTS category come from combustibles users.
JTI expects its RRP business to turn earnings-accretive by 2027 at the latest.
The Ploom brand was launched in Japan in 2016 with Ploom Tech, an infused tobacco device. The current HTS-type product Ploom X debuted in 2019, followed by Ploom Aura this year, which has now replaced earlier versions in Japan.
JTI launched Ploom X in Malaysia in January.
“We have high hopes that the HTS category will continue to grow in Malaysia. It’s a large, sophisticated market that embraces innovation. We aim to tailor our products to local consumer preferences, as we do in Japan,” says Yanagino.
Ploom’s top markets are currently Japan, Slovakia and the Czech Republic, with Japan and South Korea the leading markets in Asia.
Drivers of HTS adoption
Yanagino explains that HTS products appeal to consumers in Japan for two main reasons: perceived harm reduction and convenience.
“In Japan, smoking areas are limited, so many find heated tobacco more practical. Users also see it as cleaner — no smoke, no ash and less odour.”
Japan recognises heated tobacco as a reduced-risk category, according to him.
“These products don’t combust and they emit fewer harmful chemicals. Several countries such as the UK, the US and those in the European Union recognise the reduced risk potential of tobacco and nicotine products that do not combust or burn, such as HTP, vapes and nicotine pouches. That is because eliminating combustion leads to lower levels of selected harmful chemicals in tobacco products,” he notes.
Asked about the ban on electronic cigarettes (e-cigarettes) in some markets, Yanagino says JTI complies fully with local laws.
“We respect the laws and regulations in all the markets where we operate. And if that’s [the ban] the regulation, we will always comply. In Japan, this is a growing category, so it makes sense to invest. Wherever markets permit, we will continue to expand the RRP category. We have always been pro-choice,” he adds.
Illicit trade, including smuggling and counterfeiting, remains limited in Japan. Yanagino warns that it could rise if tobacco taxes are increased.
He says the reasons illicit trade has not become a major issue in the Japanese market include the fact that tobacco retail sales are limited to stores authorised by its finance ministry. Logistics and distribution routes are also restricted, making the supply chain highly transparent.
Another reason is that consumers are extremely sensitive to differences in packaging and taste.
Under Japan’s Pharmaceuticals and Medical Devices Act (formerly the Pharmaceutical Affairs Act), liquids containing nicotine are classified as pharmaceutical products, while devices used to inhale them are medical devices. Their sale requires approval from its health, labour and welfare ministry.
As a result, e-cigarettes sold in Japan generally do not contain nicotine. JTI does not manufacture or sell disposable e-cigarettes.
As Yanagino emphasises, “In Japan, there are essentially two categories: traditional combustible cigarettes and heated tobacco.”
Save by subscribing to us for your print and/or digital copy.
P/S: The Edge is also available on Apple's App Store and Android's Google Play.
The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.
Related Stocks
Comments