CNTC Launches QR Code Reform (2024)

China’s State Tobacco Monopoly Administration (STMA) in early May 2023 announced labelling QR codes on cigarette packs, a move attracting the most buzz and discussion in and outside of the industry.

So, what is the cigarette QR code reform? What profound impacts will it have on China’s tobacco industry?

The context of cigarette QR code program

As we enter the IoT era, digital identity and digital identification become its infrastructure, and QR codes serve as digital identity cards, meeting the era’s needs of “one thing, one code”. With the existing coding system, we can even assign a QR code to every grain of sand on the earth. Although China is not the birthplace of QR code technology, it has grown into the largest application country. As an Internet portal and intelligent identification carrier, products with QR codes can be traced and tracked, and the data produced in the whole process of production, transportation, and sales available. Together with big data analysis and application, it will lead to more new technologies and new models.

When the unified application program of cigarette QR codes in the tobacco industry was launched in 2020, CNTC piloted the technical verification and production adaptability verification of “pack, carton, case” related technologies for mainstream packaging machines, sealing machines, and sorting lines in 6 industrial and commercial corporates in the industry. By the end of 2022, all pilot work was completed and the conditions for promoting it to the entire industry were met.

The cigarette QR code program is the first attempt to assign an ID card to each pack of cigarettes (the smallest packaging unit). Based on this, various applications form big data, allowing the tobacco industry to grasp the micro level flow of cigarettes for the first time. This is revolutionary for the planned tobacco industry. The supply side reform of the industry, which involves developing emerging industries (developing iterative products), providing marketable products, reducing inventory, and eliminating excess production capacity, all relies on a complete, intelligent, and efficient industrial chain and supply chain system, which is driven by a huge amount of effective data. The core of market-oriented reform today is whether big data on tobacco product consumption can be used as a basis to adjust tobacco product plans to better meet market demand.

QR codes on cigarette packs and cartons produce deep impact

As for QR codes, they have pros and cons for industrial and commercial corporations under CNTC and retailers in the industry, but overall it is believed that this measure will have a profound impact on the tobacco industry in the future.

There are two basic views shared by the industrial corporations. One holds that QR codes are conducive to the further healthy development of big brands, and protectionism in many places will be broken with the strengthening of standardized operations. The other thinks that this reform will not enable the expansion of big brands, and many people are concerned about whether the technological upgrading and standardization of controlling the illegal outflow of cigarettes will fundamentally change the market circulation ecology, thereby affecting the performance of brand status.

For commercial corporations, the introduction of QR codes provides a very good impetus for their reform. There are also two basic views here. The optimistic view believes that QR codes are mainly used to regulate the business behaviors of retailers and the illegal outflow of cigarettes, and will not have a significant impact on existing marketing strategies. The other more pessimistic view believes that the popularity of QR codes will force commercial corporations to examine whether existing contract procurement, customer classification, and supply placement strategies can continue, which is likely to cause significant turbulence in marketing work in the short term. Retailers are also highly concerned about the policy.

Big cigarette retailers or those who engage in illegal business practices strongly oppose this policy because a significant portion of their profits are obtained through the outflow of cigarettes. Premium retailers with certain business capabilities and standardized operations strongly support this policy as their profits mainly rely on their own operations and consumer maintenance. Therefore, they strongly hope that the tobacco industry will crack down on illegal behaviors in any form, and QR codes can further strengthen their business operations. Small and medium-sized retailers think that the policy has no significant impact on their business, and their most simple wish is to obtain more marketable cigarettes.

It can be said that QR codes on cigarette packs and cartons appear to be a digital reform measure aimed at regulating business behaviors, but at a deeper level, it will inevitably have a profound impact on the market-oriented reform of China’s tobacco industry, and is likely to trigger a larger, deeper, and broader “butterfly effect”. Overall, it is a favorable measure that has more advantages for industrial and commercial corporations, retailers, and consumers, which will result in healthy and orderly development of the industry and achieve high-quality development goals.

Looking ahead to the future, the tobacco industry is about to come into an era of QR codes, achieving traceability in the full cigarette production and circulation process. The tobacco industry for the first time has grasped the flow of every pack of cigarettes from retail to consumption, and its important impact will gradually emerge in the next decade.