The potential impact of electronic cigarettes on health has always been the focus of attention of social and regulatory authorities.
According to media reports, the U.S. Food and Drug Administration (FDA) recently said that it was investigating 35 cases of epileptic seizures after vaping. And this year’s March 15 Party pointed to the long-term vaping will also produce dependence on nicotine.
The FDA has received dozens of reports about the seizures may caused by electronic cigarettes
However, this does not seem to hinder the market’s enthusiasm for e-cigarettes. Electronic cigarettes are positioned as healthier and more fashionable than cigarettes in the process of marketing, and are sought after by a large number of people. Some organizations believe that in the future, the size of the vape market is expected to exceed 300 billion yuan.
In this market opportunity, the vape industry chain stands on the wind, and “windfall” has become the pronoun of the industry. The accelerated involvement of capital in this industry has also changed the situation of enterprises and competition in this industry chain.
Only those enterprises that are really in this industry chain can feel the pulse of industry development better. Recently, a reporter from Securities Daily interviewed Zhang Yang, the head of a small and medium-sized enterprise in the upstream of the electronic cigarette industry chain. Unlike the outside world, he reluctantly told reporters that the tuyere is the tuyere of capital. Entity enterprises in the chain of vape industry have been differentiated. “Enterprises that can pull capital investment stand at the outlet, but those that did not get capital investment are becoming more and more difficult to survive. Most of the small and medium-sized enterprises around are in transition.”
Electronic Cigarette: Approaching the Capital Carnival
Zhang Yang told reporters that few people know that electronic cigarettes originated in China. The first electronic cigarette in China is called “Ruyan”, and its founder is Han Li. For example, tobacco sales soon exceeded 100 million yuan after its introduction in 2003. Afterwards, it was affected by other factors, such as the market the vape to overseas countries, its performance shrank, and finally it was acquired by Imperial Tobacco.
Zhang Yang introduced that for more than ten years, affected by multiple factors, the industry has been developing in a low-key way, the domestic market is not large, mainly doing export trade. Until the intervention of capital, let the industry’s exposure continue to increase.
According to Tonghuashun data, there are 8 listed companies in the electronic cigarette concept stock market.
“The day of earning money is over,” Zhang Yang, the head of the small and medium-sized enterprises, told reporters. More and more capital is involved in the industry, and they prefer the head enterprises. With the help of capital, these enterprises began to expand the industrial chain and seize channels. “Before, everyone had a profit, now my friends are in transition.”
Capital will choose the leading enterprises in the industry, and then develop the whole industry chain. “Three years ago, the e-cigarette enterprises were made by everyone, and now resources and business are concentrated in the head enterprises.” Zhang Yang explained to reporters, “There are thousands of large and small producers and brand companies in Shenzhen. My company is mainly development-oriented and production-oriented, mainly to do hardware molds, before the company’s 90% business is to do electronic cigarettes, now only 30%.
In Zhang Yang’s view, with the intervention of capital, their living space becomes narrow.
However, Shen Meng, executive director of Xiangsong Capital, told reporters that the threshold of electronic cigarette technology is not high, so a large number of manufacturing enterprises will soon emerge.
In the outside world, electronic cigarette is a profitable industry. Shen Meng told reporters that, referring to cigarettes, electronic cigarettes may have a large profit margin.
Zhang Yang said that the “windfall profit” of electronic cigarettes is relative. “The manufacturer develops a product at a cost of 50 yuan, and the factory price is 60 yuan to the sales company. It can be sold to 299 yuan at the lowest level in the market.” In this industry chain, the profit of the producer is certain, and the profit of the sales company is related to the marketing cost of the enterprise.
“If the sales company takes 200 yuan to market, its profit is not high. But if only 10 yuan is used for marketing, its profit margin will be considerable. Zhang Yang introduced.
With the help of capital, marketing means of some enterprises have been upgraded constantly, and channels have become the indispensable place for manufacturers. “Capital is to occupy channels with money. There are too many marketing means for Internet enterprises and too much pressure for traditional enterprises,” Zhang said. “What I am most worried about now is that after decades of painstaking operation in the industry, there will be 500 to 2000 people in scale. Capital will overtake it in one year.”
Zhang Yang said he did not want the industry to become the next shared bicycle.
Performance differentiation?
In Zhang Yang’s opinion, when SMEs are facing difficulties in their development, the performance of some leading enterprises has experienced explosive growth.
Feelm specializes in the R&D, production and sales of electronic atomizers and open electronic atomizers, and is a subsidiary company of A-share listed company Yiwei Lithium Energy. On April 2, Yiwei Lithium Energy released its forecast for the first quarter of 2019, which shows that the company expects net profit to grow by 120% to 150% year-on-year in the first quarter. Yiwei Lithium said that the company’s performance rose year-on-year due to a number of factors, including the performance of Shenzhen Feelm Co., Ltd., a shareholding company, which exceeded expectations, resulting in a substantial increase in the company’s investment income year-on-year.
Feelm belongs to the group of companies that have access to capital. It is understood that on February 28, 2014, Yiwei Lithium signed an equity transfer agreement with the original shareholders of Feelm. Yiwei Lithium bought 50.1% of Feelm’s shares in Chen Zhiping and Xiong Shaoming at a cash consideration of 439 million yuan. From 2017 to 2018, Yiwei transfer Feelm’s shares twice. Lithium Energy Co., Ltd. introduced that the company’s investment income to Feelm in the past two years under the equity law totaled 361 million yuan. Among them, the second half of 2017 was 0.63 billion yuan, accounting for 13.07% of the company’s total profits, and in 2018 was 298 million yuan, accounting for 49.26% of the company’s total profits.
It is worth mentioning that on December 26, 2018, Feelm announced that based on the capital market development and the company’s business development plan, the company plans to list on other stock exchanges, and the company intends to apply for the termination of the listing of shares in the national small and medium-sized enterprises stock transfer system.
Potential health hazards to be solved
Since the emergence of electronic cigarettes, whether they pose a threat to human health has always become a hot issue of market concern.
Some experts told Securities Daily that the current domestic research on e-cigarettes is limited, “Only the World Health Organization’s statement is kind of persuative.” According to media reports, the World Health Organization believes that electronic cigarettes also contain nicotine, formaldehyde and other harmful compounds, which are harmful to public health and must be tightened.
Recently, the FDA released a report that since June 2018, reports of epileptic seizures have increased slightly. Between 2010 and 2019, it received 35 reports of epileptic seizures following the use of electronic cigarettes, especially among adolescents and young people. Severe nicotine poisoning can cause epilepsy.
However, the FDA also said that it was not clear whether electronic cigarettes caused the outbreak of these cases. Follow-up investigations are needed to determine whether there is a real link between the two.
For health issues of market concern, Zhang Yang believes that electronic cigarettes are healthier than ordinary cigarettes, but also different from person to person. In their view, “electronic cigarettes do not produce tar, carbon monoxide and nitrides, which are the main hazards of cigarettes.”
In an interview with reporters, Shen Meng said that electronic cigarettes are not free of all kinds of harmful substances of cigarettes, or even because of the name of electronic cigarettes, consumers ignore health and safety issues, so electronic cigarettes still have hidden dangers. If we verify that electronic cigarettes may cause health hazards, then the possibility of being banned exists, but if only the same hazards as ordinary cigarettes, then the possibility of banning is not very big, but the revenue of enterprises will be affected. “If the U.S. ban on the sale of electronic cigarettes, it will have a greater impact on the concept of valuation, but if there is no domestic ban, then it can still be listed, but the probability will be greatly reduced in the future, regulators will also take social feelings into account .”
