Highly addictive and totally unregulated: Inside Big Tobacco’s knock-off vape nightmare

A mosaic of brightly colored vapes and nicotine pouches stretches across the shelves of a sidewalk convenience stand in Manhattan. There are cigarettes too.

“You can’t just sell cigarettes,” said Suhel, the man who runs the stand in the Chelsea neighborhood of New York City. He would know — nicotine products make up the bulk of everything he sells.

Young people are more likely to buy vapes, Suhel said, and the most popular ones are disposables made in China. Older people still buy cigarettes but are increasingly turning to vapes too. The only American vape brand Suhel sells is Juul, and it’s the least popular at his stand. 

Disposable Chinese vapes are rampant on shelves all across America.

None of them are authorized by the FDA.

The biggest tobacco companies in the US don't think Chinese vape makers are playing fair. As consumers turn more to smokeless nicotine products, Big Tobacco wants a bigger piece of the pie, and it wants the FDA to help make that happen by more strictly enforcing the rules. 

The FDA doesn’t technically approve tobacco products and e-cigarettes, but it does dole out marketing orders that allow them to be sold in stores. Only a handful of vape brands are authorized by the FDA to be sold, including Altria’s NJOY and RJ Reynolds’ Vuse. Both are legacy tobacco companies: Altria (better known as the owner of Philip Morris) makes Malboros, and RJ Reynolds (a subsidiary of British American Tobacco) makes Newports.

But the most popular brands aren’t the ones from the US that are trying to adhere to regulations. According to the 2023 “National Youth Tobacco Survey,” Elf Bar — a Chinese brand not authorized by the FDA — was the most popular disposable vape being sold in the US. 

Vapes like Elf Bar make their way into the country through porous entry points, and their prevalence in the US indicates that they’re routinely getting past regulators whose job is to make sure they stay off shelves.

“Illicit and potentially harmful disposable products emanating from China continue to flood the US market,” a Juul spokesperson told Sherwood. “These products are not in compliance with the FDA’s regulatory regime and, in many cases, are flagrantly targeting the country’s children.”

iMiracle, the maker of Elf Bars, and its lawyers didn't respond to requests for comment. A company rep told Reuters in a December article that it's “trying our best to stay compliant in the US," but the regulations are hazy.

On a recent earnings call, Altria CEO William Gifford told analysts his company recently sent representatives to Washington, DC, for a meeting on Capitol Hill with the FDA and the Department of Justice about illicit vapes. They accompanied the regulators to stores around the FDA headquarters, where they found at least five that sold illicit vapes.

“It's one thing to drive momentum and awareness,” Gifford said. “We need momentum and action."

Altria estimates that illicit vapes make up more than 60% of the category, which it said has grown 40% so far this year. 

When asked by Sherwood why unauthorized vapes fill American shelves, the FDA pointed to two recent instances where it seized hoards of illegal vapes in Los Angeles and Chicago. It has also issued hundreds of warning letters to retailers that it says sell Elf Bars.

In June, RJ Reynolds filed a complaint with the US International Trade Commission alleging that about three dozen manufacturers, including iMiracle, were infringing on its intellectual property. It asked the USITC to ban imports of those vapes. The USITC opened an investigation July 17. 

An RJ Reynolds rep said, “These illicit, disposable vapor devices have unknown ingredients, bypass regulations, and jeopardize public health while infringing Reynolds’ patent rights.”

Crown Juuls 

Vapes, in theory, are supposed to wean cigarette smokers off their addiction, not introduce nonsmokers to a new vice. That’s why the FDA prohibits fruit- or candy-flavored vapes so that they don’t appeal to children. (Elf Bars come in flavors like Banana Cake or Cherry Dragonfruit.)

Juul, which has disposable cartridges but a reusable battery, boomed in popularity a decade ago and has been widely blamed for bringing back nicotine addictions in young people who were starting to lay off cigarettes.

In June 2022, the FDA issued a marketing ban on Juul, saying it didn't show its products were safe. That ban was lifted this June, and now it’s trying to make up for lost time and regain market share.

Meanwhile, other Big Tobacco players also entered the market as vaping’s popularity increased. Altria bought and then got rid of a stake in Juul, and in June 2023, it acquired NJOY, a company whose vapes were already authorized by the FDA, for roughly $2.75 billion. 

Four months later, it filed a lawsuit in California against manufacturers, distributors, and retailers that it says sell vapes not authorized by the FDA. 

That case was dismissed by a judge in January, but NJOY filed a narrower version five days later that’s still playing out. NJOY essentially wants a court to do what it thinks the FDA should be doing: taking illicit vapes off shelves. 

The lawsuit lists dozens of competitors, most of them Chinese, alleging that their illegal activity was hurting their lawful business. NJOY also sued a group of smoke shops in the LA area that it says sell those products. 

Scott E. Schutzman, who represents some of the smoke shops Altria sued, said his clients don’t sell flavored vapes, so NJOY shouldn’t be entitled to damages. 

“I really think we’re going to smoke them on these motions,” Schutzman said. 

Who is iMiracle? 

Not much is known about iMiracle, the company that makes the most popular vapes in the US. 

It was an early leader in the overseas vape business and is considered a dominant player in the industry, said Matthew Ma, marketing director of Ecigator, a Shenzhen-based disposable-vape maker that competes with iMiracle.

The disposable-vape industry started growing in China in about 2010, Ma said, and since then manufacturers have honed their production and marketing. A huge swath of Chinese disposable-vape manufacturers are based in Shenzhen, a huge city with a big commercial presence north of Hong Kong. 

“Various factors, including but not limited to nicotine addiction and the desire for teenagers to look cool, make the US market a global hub for vape innovation,” Ma said. “This might also relate to Americans' adventurous nature, as they are more willing to accept new things and try new adventures.”

iMiracle has been embroiled in intellectual-property disputes. It technically no longer even makes the “Elf Bar,” though its product is still ubiquitously called by that name. 

A February 2023 injunction issued by a federal judge in Florida ordered iMiracle to stop using the Elf Bar brand after VPR Brands claimed the rights to the name. iMiracle took the words “Elf Bar” off its vapes and replaced it with “EBDESIGN BC5000.” 

A year before that, iMiracle filed more than 50 lawsuits in Florida in 2022 against shop owners selling allegedly counterfeit Elf Bars. All those suits appear to have been dismissed, and iMiracle’s attorney, Gabrielle Penalta, was scolded by judges for missing deadlines, court filings showed.

Penalta didn’t respond to requests for comment. Neither did Eric Heyer, the attorney defending iMiracle from NJOY’s lawsuit, nor Yi Wan, the lawyer who handled iMiracle’s trademark filing.

Rise in FDA Enforcement

This year, the FDA has refused more shipments of tobacco products than it has in any year since at least 2010, the last year for which data is available. 

Illicit nicotine products often make their way into the US through middlemen who buy them in countries where they are permitted and then sell them to retailers, said Ma and Adam Lees, a customs broker in New York.

These products likely circumvent federal regulations through “de minimis” shipments, Lees told Sherwood in an interview. Those are shipments under $800, which are allowed to get into the country duty-free. The FDA and US Customs and Border Protection say they inspect every commercial shipment. 

E-commerce giants Temu and Shein are known for using that loophole to avoid tariffs. The number of de minimis shipments reached 1 billion in 2023, up from 637 million in 2020, according to CBP. So far in 2024, 705 million de minimis shipments have been sent to the US.

“The success of legal products is dependent on the FDA doing more to tackle illicit vapor,” Tadeu Marroco, CEO of British American Tobacco, told investors on a recent call. “Clearly, the pressure for enforcement is building.”

“Zyndemic”

US tobacco companies say the prevalence of illegal vapes has hampered their ability to penetrate that market, but they have had better luck with nicotine pouches, often referred to as “snus.” Still, unsanctioned snus are landing on shelves and sapping at least some sales.

Gifford, Altria’s CEO, told analysts on Wednesday that the company sent the FDA “data that supports our increasing concern that illicit market actors are expanding into the nicotine pouch category.”

“We believe it is critical,” he said, “that the FDA acts decisively to regain control over the oral nicotine pouch category to prevent another widespread illicit market from taking hold.”

Snus have grown more popular in the US, particularly among Gen Z, partly because social-media influencers have helped them go mainstream.

The FDA has refused nearly 500 shipments of snus, mostly from Sweden, so far this fiscal year, according to government data.

Joakim Jacobsson, the chief legal officer ofStockholm-based Skruf Snus, one of the brands often rejected at US ports, told Sherwood that e-retailers buy their products in the EU and then try to get them into the US. 

“We do not have any distribution of our Skruf products to the US. Our products are solely intended for European markets,” Jacobsson said in an email. “We do know that some European e-tailers buy our products in the EU and ship them to consumers in the US. This is, however, not sanctioned by us.”

Snus have been a boon for Philip Morris International (which is distinct from the Philip Morris owned by Altria). It bought Swedish Match, the maker of Zyn, in 2022, and reported a 50% increase in shipment volume for its Zyn pouches in the second quarter of this year despite major supply-chain hurdles. It raked in $3.6 billion in revenue from its smoke-free tobacco business, up 18% from a year ago. That compares to just 4.8% growth in its combustible-tobacco business, which is made up of cigarettes and cigars. 

Zyn is among the most popular brands of nicotine pouches in the US, partly thanks to Zynfluencers, and Philip Morris International is trying to grow its supply chain before competitors — illegal or otherwise — bite off too much of its market share. 

British American Tobacco sells nicotine pouches like Velo, which are most popular in Europe. In the US, BAT’s revenue from its nicotine pouches increased by 122%, with volume up 226% in the first six months of this year compared to the same period last year. That comes amid a US marketing push and a Zyn shortage. BAT said it will invest £600 million ($771.5 million) to expand production of nicotine pouches this year. Philip Morris International said it would spend $1.4 billion to expand Zyn production.

After Philip Morris International executives on their most recent earnings call cheered the success of Zyn, they were also grilled by analysts who have seen competing products that aren’t FDA-sanctioned on the shelves. Those products’ presence has sparked worries that, like the vaping industry, Big Tobacco’s nicotine pouches may lose market share to illicit products.

Owen Bennett, an analyst at Jefferies, is one of the analysts who said he saw illicit pouches on shelves. He asked, “How do you see the risk we could see a similar scenario developing in pouches in the US and to what we're seeing in vape with the legal products?”

Callum Elliott, an analyst at Bernstein, doubled down.

“What can you do and what are you doing to stop European e-commerce retailers selling this product?” he asked. “It strikes me that this presents a pretty meaningful potential risk to your US Zyn business if this illicit product continues entering the US market in this way.”

Emmanuel Babeau, Philip Morris International’s CFO, said the infiltration of illicit nicotine pouches hasn’t had a "material" effect on its business and that the FDA is taking an increasingly harder stance than it used to.

“And if it was to become the case,” Babeau said, “we would expect the authority to have the same proactive behavior that I think they are starting to implement on vaping.”