OEM factories work day and night while big brands suffer pains

/March 26th, China/ Although in the capital market, the stock prices of some big e-cigarette brands have fallen sharply, the reporter found that in Shenzhen’s Bao’an District, known as the “Global Vape Valley”, the relevant persons in charge of many e-cigarette factories in Fuyong and Shiyan areas said that the current ordering is still hot, and some factories have been expanding their production lines since early March and are constantly hiring workers to work overtime to produce vapes.

On the other hand, some brand owners are even more anxious about the new policy in China, discussing coping strategies all night long, especially for companies with a large domestic market, considering making certain adjustments. Some practitioners have called for better adaptive measures for the emerging e-cigarette industry chain that involves a wide range of areas in the sociaty.

China: Avoid returning to the planned economy in e-cigarette regulation

/March 25, China/ Regarding the regulation of the e-cigarette industry, it is necessary to take into account the characteristics of different products, and it is advisable to adopt refined regulation rules instead of “one size fits all”.

Recently, the website of the Ministry of Industry and Information Technology issued the “Decision on Amending the Implementation Regulations of the Tobacco Monopoly Law of the People’s Republic of China (Draft for Solicitation of Comments)” (hereinafter referred to as the “Draft for Comments”), proposing that new tobacco products such as e-cigarettes should be implemented in accordance with relevant regulations of cigarettes.

One stone stirred up a thousand waves. Although the “Draft Opinions” has not yet issued specific regulatory rules, the impact on the market has already appeared. On the same day, a Chinese e-cigarette brand listed company was affected by it. Its stock price fell by more than 40%, and its market value lost more than 12 billion U.S. dollars, or nearly 100 billion yuan.

Obviously, the capital market with feet voting is full of doubts about the future of China’s emerging e-cigarette industry, which may affect a market with a scale of hundreds of billions or even trillions in the future.

Different voices also began to appear. According to a report from the Beijing Daily on March 23, the Beijing Tobacco Control Association responded that the chaos of e-cigarettes should be regulated stronger, but it is recommended not to include tobacco monopoly regulation, but sent to the health department, food and drug regulation department or market regulation and management bureau for regulation. Zhang Jianshu, president of the Beijing Tobacco Control Association, also believes that regulation by food and drug regulation and management or by market regulation and management departments has proved feasible and effective in foreign countries.

Objectively speaking, in order to promote the regulation and development of the e-cigarette industry and maintain public health, necessary regulation is indeed indispensable. However, it must also be reminded that while bringing e-cigarettes into the regulatory track of the rule of law, it is also necessary to avoid a fully competitive industry returning to the “old path” of a planned economy.

According to China’s “Tobacco Monopoly Law”, the total annual output plans of cigarettes and cigars in provinces, autonomous regions, and municipalities directly under the Central Government are issued by the planning department of the State Council. According to the annual total production plan issued by the planning department of the State Council, the China National Tobacco Corporation assigns to provincial tobacco companies tiered and categorized cigarette production indicators. Provincial tobacco companies, based on the cigarette production indicators of grades and types issued by the China National Tobacco Corporation, and combined with market sales, assign cigarette production indicators of grades and types to tobacco product manufacturers. Tobacco product manufacturers may appropriately adjust the cigarette production indicators of grades and types within the scope of the enterprise’s total annual output plan according to the market sales situation.

This may not be wrong for the traditional tobacco industry, but if e-cigarettes refer to tobacco regulation, does it mean that the annual production capacity of e-cigarette companies must also be managed by the plan? At present, the e-cigarette industry is mostly private enterprises. If the operational autonomy of private enterprises is included in the planning scope of relevant departments, it will obviously conflict with the company law. This will also touch the bottom line of China’s market economy system.

In addition, the state implements monopoly management on the production, sale, import and export of tobacco monopoly products in accordance with the law, and implements a tobacco monopoly license system. If the same regulatory measures are adopted for e-cigarettes, the free production and circulation of e-cigarettes will be restricted, causing serious setbacks for industry enterprises. Nowadays, for many people, it is hard to imagine that the circulation of an electronic product will still require multiple levels of approval in the future. This is not in line with the original intent of the market economy, and it will even create room for rent-seeking and corruption by seeking accommodation from local authorities.

From the perspective of the global market, the e-cigarette industry has formed an industrial pattern of “Made in China, consumed in Europe and America”, and has formed a relatively sufficient competitive landscape; at the same time, the e-cigarette industry has contributed a lot of trade exchanges and exports to China. Obviously, to include the e-cigarette industry under regulation, it is also necessary to fully consider the market structure and development prospects of this emerging industry, as well as the resulting impact on foreign trade and foreign exchange earnings.

However, China’s tobacco administration has also imposed strict restrictions on the import and export of tobacco. For example, the “Regulations on Strengthening the Administration of Cigarette Exports” issued by the State Tobacco Monopoly Administration requires that the export of cigarettes should be registered in a timely manner in accordance with relevant national regulations. It should also be reported to the Import and Export Corporation; customers who export cigarettes must undergo qualification and credit review. The Import and Export Corporation shall establish a national export cigarette client file. In extreme cases, if such regulation becomes a reality, it will also severely impact the overseas trade of China’s e-cigarette industry, and affect the dominant position of China’s e-cigarette companies in the global competitive landscape.

In fact, from a global perspective, the current regulatory thinking adopted is to regulate e-cigarettes in accordance with “medicine” or “consumer category.” Australia and Japan have adopted the first model, and the UK and Indonesia have adopted the second model. The regulatory experience of these countries avoids the regulatory thinking of equating electronic cigarettes with tobacco, and may provide a reference for China’s regulatory authorities to formulate detailed rules.

In general, it is necessary to consider many factors in order to protect the health of the public and regulate the electronic cigarette industry. Therefore, when formulating the corresponding rules, the relevant departments may wish to involve more relevant enterprises in the discussion, absorb more social feedback, and learn more from the mature experience of foreign countries to form more scientific and reasonable decision-making to achieve the balanced development of the industry’s economic and social benefits.

China e-cigarette regulation will be consistent with traditional cigarettes

On March 22, the Ministry of Industry and Information Technology in China issued the “Decision on Amending the Implementation Regulations of the Tobacco Monopoly Law of the People’s Republic of China” for public comments. The Ministry of Industry and Information Technology has added an article to the supplementary provisions of the “Regulations on the Implementation of the Tobacco Monopoly Law of the People’s Republic of China” (hereinafter referred to as the “Implementation Regulations”) as Article 65: “E-cigarettes and other new tobacco products shall be implemented in accordance with the relevant regulations on cigarettes in these regulations.

 

The Ministry of Industry and Information Technology stated that in recent years, there have been some new situations and new problems in the market regulation of new tobacco products such as e-cigarettes, and all aspects of society are paying great attention. This revision is mainly to clarify the legal basis for the regulation of new tobacco products such as e-cigarettes, and to do a good job in linking up with the “Law of the People’s Republic of China on the Protection of Minors” and other laws and regulations, and to give play to the importance of the rule of law to consolidate fundamentals, stabilize expectations and benefit the long effect. In view of the homogeneity of new tobacco products such as e-cigarettes and traditional cigarettes in terms of core components, product functions, consumption methods, etc., new tobacco products such as e-cigarettes should be implemented in accordance with the relevant regulations on cigarettes in the Implementation regulations. This is also consistent with the regulation of new tobacco products such as e-cigarettes in major countries and regions in the world. The implementation of new tobacco products such as e-cigarettes with reference to the relevant regulations on cigarettes in the “Implementation Regulations” will greatly enhance the effectiveness of e-cigarette regulation, effectively regulate e-cigarette production and operation activities, and solve the product quality and safety risks of e-cigarettes, false advertisement problems, etc. And effectively protect the legitimate rights and interests of consumers.

According to the explanation, there are three main considerations for the revision of the implementation regulations:

The first is to promote the legalization of e-cigarette regulation, clarify the legal basis for the regulation of new tobacco products such as e-cigarettes, and do a good job in linking up with the “Law of the People’s Republic of China on the Protection of Minors” and other laws and regulations.

Second, in view of the homogeneity of new tobacco products such as e-cigarettes and traditional cigarettes in terms of core components, product functions, consumption methods, etc., new tobacco products such as e-cigarettes should be implemented in accordance with the relevant regulations on cigarettes in the implementing regulations. This is also consistent with the regulation of new tobacco products such as e-cigarettes in major countries and regions in the world.

The third is to implement e-cigarettes and other new tobacco products with reference to the relevant regulations on cigarettes in the implementing regulations, which will greatly improve the effectiveness of e-cigarette regulation, effectively regulate e-cigarette production and operation activities, and solve the product quality and safety risks of e-cigarettes, false advertisement problems, etc. And effectively protect the legitimate rights and interests of consumers.

E-cigarette industry is making a comeback in China

Recently, a patent of China Tobacco Yunnan Industry Co., Ltd. “a smart heat-not-burn electronic cigarette” was reported by the media. Many industry professionals expressed their points of view. This may indicate that traditional tobacco companies will enter the field of electronic cigarettes, thereby accelerating the industry’s growth and reshuffle.

Then, in the face of the news that traditional cigarette companies are about to enter the game, do e-cigarette brands, factories, and offline distributors deal with it calmly, or are they worried?

Is the “most worrying thing” for small and medium brands coming?

As early as November 2019, after the relevant authorities issued the “Notice on Prohibition of Selling Electronic Products to Minors”, the e-cigarette industry officially announced that it was “disconnected”, and the sales channel was also changed from online e-commerce to offline channels.

From this point on, the leading e-cigarette brands have opened up offline counters and chain stores on a large scale, and small and medium-sized brands are also working hard at vape shops, convenience stores, and cigarette stores to make up and digest the original 45% of online sales.

“E-cigarette profits are relatively large, but our brand has basically not made any money in the past year.” Chen Zehao (pseudonym) is the person in charge of an e-cigarette brand in Shenzhen. He told reporter: In 2020, the brand’s e-cigarettes The shipment volume of devices is 30,000 sets, and the volume of pods is about 280,000. Compared with 2019, its sales have fallen by nearly 56%.

According to the calculation that the profit of electronic cigarette sticks is about 50% and the profit of cartridges is about 25%, the sales profit is still nearly 4 million. To say that this income is still considerable, why not make money?

“In the first half of 2020 alone, we have invested nearly 10 million yuan in expanding offline channels.” Chen Zehao said that the company currently has 380 offline sales counters in southern China, and more than 1,000 convenience stores and vape shops that sell its products. In order to boost the enthusiasm of counters and agencies to promote its e-cigarette products, the company rewards the sales network with a reward of about 15%, and some of the main counters even have a rebate of more than 20%.

At the same time, the advertising materials of offline counters, agency stores, and the salary expenditures of regional local promoters also accounted for more than 60% of the company’s total operating costs. All of this is to avoid being eliminated in the fierce competition in the industry.

According to the data disclosed by Tianyancha, as of November 4, 2020, there are more than 21,000 China e-cigarette related companies whose names or business scopes include “e-cigarettes, electronic atomizers” and their status is active, existing, moving in, or moving.

But at the same time, more than 2,200 e-cigarette-related companies have been cancelled or revoked, and officially “disappeared.” Among them, 600 companies will be cancelled or revoked in 2020 alone, accounting for about 27% of the total number of disappeared companies.

“So, as soon as the news of China Tobacco Yunnan’s disclosure of e-cigarette patents came out in the past few days, I was even more worried. I finally burned so much money and survived the cracks of industry competition. Now I have to face new challenges. ”

Chen Zehao noticed that the e-cigarette patent published by China Tobacco Yunnan is shown as “smart heat-not-burn e-cigarette”. He guessed that the implementation form should be similar to iQos low-temperature heating cigarettes containing real tobacco ingredients, but currently subject to relevant policies, mainstream China products all are vapes.

Compared with vapes, low-temperature heating electronic cigarettes have the characteristics of a taste closer to real cigarettes, and can better cater to the preferences of old smokers. Once officially launched on the market, it may take away a large number of users who pursue cigarette taste from the vape field .

“This will definitely have a certain impact on the China sales of top brands, but it may be a fatal blow to small and medium-sized brands. I’m afraid that they will survive the ‘internet disconnection’ but not the entry of traditional tobacco companies.” Chen Zehaolue complained helplessly.

Obviously, the involvement of traditional tobacco companies in the e-cigarette industry may cause small and medium e-cigarette brands to suffer a new round of sales blows. Even those small and medium-sized brands that have just gained a foothold in the fierce industry competition will face a wave of elimination and reshuffle.

The “big stage” of the OEM factory is the international market

The e-cigarette industry, which seems to be cruelly competitive, is an emerging industry that emphasizes supply chain and light brand. Although many start-up brands are desperate in order to quickly compete for market share, it is the large-scale OEM factories and the upstream leaders in the supply chain that really master the raw materials and technology patents.

Therefore, this is the reason why the brand is the underdog and the factory is really the boss. So, will the news that traditional cigarette companies disclose e-cigarette patents will cause a wave of trouble at the factory and supply chain levels?

“In the past few days (news) there has been madness among upstream and downstream companies such as factories and materials.” In 2016, Liao Ge invested nearly 4 million yuan to establish an electronic cigarette factory in Baoan, Shenzhen, which mainly produces electronic cigarettes. They currently has more than 60 employees.

Compared with other e-cigarette factories in the surrounding area, the scale of his factory is not too large, but it can also achieve an annual production capacity of 3 million cartridges. Although the news of traditional cigarette giants entering the electronic ciagarete field has been circulated recently, Liao Ge believes that it should not have much negative impact on vape manufacturers. “After all, the current products of many factories are mainly sold overseas.”

“Our factory’s OEM brands are focused on overseas markets such as Europe and the United States, and have always been taking the high-end route.” He told reporter. As early as the beginning of his business, the factory had also cooperated with China small and medium e-cigarette brands and start-up teams. , producing some electronic cigarette products. For a period of time, they also processed and produced some vape sticks and cartridges that were highly imitation of well-known e-cigarette brands according to customer needs, and then they were shipped by customers through WeChat business channels.

However, the industry market has been fiercely competitive in the recent period, too many small and medium-sized brands have iterated and died, and the volume of OEM products has become less and less. The factory feels that the risks are high and the profits are low. Therefore, six months ago, Brother Liao began to ponder the transformation.

“Upgraded new technologies and production lines, and further increased the intensity of cooperation with foreign brands.” At present, nearly 90% of the OEM products of the e-cigarette factories he manages are sold to overseas markets, even if traditional tobacco companies enter the market. As a result, the domestic electronic atomizer market is facing new competitive pressures. He believes that only the remaining 10% of domestic orders in the factory can be dealt with.

In fact, affected by fierce market competition and changes in industry policies, some e-cigarette brands and factories are actively expanding their factory’s business in the European and American markets. According to Liao Ge, many factories in Shenzhen currently control orders at 50% or even less in order to cope with sudden market risks in China.

According to the prospectus issued before the listing of Smoore, in the four years from 2016 to 2019, Smoore’s direct and indirect sales of products to the United States accounted for 55.4%, 49.9%, 52.4% and 46.5%. It is reported that 80% of Smoore’s products are sold to Europe, America and Japan.

According to some publicly available third-party data, as of 2019, the U.S. accounted for 66% of the global e-cigarette market, the EU and the U.K. accounted for 33%, far exceeding China’s 7%.

Obviously, for most China e-cigarette factories, its larger “stage” is overseas. Even if the China e-cigarette market is facing a new round of reshuffle, the impact on the factories in China is very limited.

Offline “One Meter Counter” is more at ease

As e-cigarettes “internet disconnected” in China, brands have opened up offline channels. In the past year or so, a large number of e-cigarette stores have opened one after another, becoming the main force for major brands to compete for market share. Those small one-meter counters also carry all the hope of China sales of electronic cigarette brands.

Then, as the news of traditional cigarette companies or their involvement in the e-cigarette industry continues to ferment, will offline e-cigarette sales channelists also worry that future operations will be further impacted?

In the eyes of most people, obviously not.

“In fact, I think this is a good thing. At least as a terminal merchant, I don’t have to worry about it anymore.” Xiao Li runs a mainstream brand e-cigarette counter in a complex in Linshen, Huizhou, although the counters have been in the past two months. Men can be very happy, but he admits that he is a “acquaintance” business.

Every day from morning to night, customers will place orders on their mobile phones to buy pods from him, and “regular customers” often introduce “new customers” to buy e-cigarettes. This small one-meter counter is just “accepting customers” to Xiao Li “A channel and a means.

“There are nearly 4,000 friends in my phone, most of whom are customers who have bought e-cigarettes with me.” Although there are a large number of “acquaintances” who maintain the daily operation of the counter, he is still scared all day long. Especially in the past six months or so, he has been afraid that relevant regulations will be introduced again to tighten the “lifeblood” of electronic cigarettes.

Xiao Li told me that the e-cigarette product is relatively special and the audience is very single. He has accumulated thousands of “friends” regular customers after two years of operation. If the e-cigarette industry is faced with new license regulations or even stop, These customer connections cannot sell other products.

“It’s all right now. I really hope that the giant cigarette companies will launch heated e-cigarettes.” He emphasized that what offline merchants are most worried about is the current management attitude of relevant departments on e-cigarettes, and they are afraid that one day they will completely ban e-cigarette sales.

However, this patent news that went viral recently seems to be a reassurance for the majority of channel vendors. It indicates that e-cigarettes will not be banned in a short time, and there will even be new development space. “Now we are sitting in the same boat as traditional giants. , The possibility of capsizing is unlikely.”

Don’t offline merchants worry about the impact of traditional tobacco companies on the business of their small stores?

Xiao Li replied: I am not worried. In his opinion, after all, there are a large number of “smokers” customers in their hands, and they can continue to do so as long as there is still an electronic cigarette business.

Merchants will not mind the difference between vape and HNB products. As long as there are electronic cigarette products in the market, there will be corresponding consumer demand. In fact, Xiao Li has joined three different e-cigarette brands in the past two years of business.

“Which brand has great support, high profits, and many rebates, I choose which one.” He revealed that some dealers in the industry even joined a certain brand of e-cigarettes, and then all brands are doing it behind the scenes. In actual operation he only push products with high profits.

In many commercial complexes in Shenzhen, the reporter found that almost all merchants will invite consulting customers to add friends in order to develop the private domain traffic of smokers “regular customers”. The “internet disconnection” of e-cigarettes and the off-line efforts of brands indirectly enable franchisees to master a large number of customer resources, and it is also convenient for future expansion of new brands or new businesses.

In the past two years, the e-cigarette industry has developed rapidly under the impetus of capital, and a large number of new brands have been born. However, no relevant product standards have been issued in the industry so far. This has also led to chaos in the market, with more and more brands, merchants and factories began to expand blindly and grow wildly.

Concluding remarks

Some industry analysts pointed out that if traditional large-scale cigarette companies enter the e-cigarette industry, it may be expected to accelerate the regulation of product-related standards and at the same time guide the e-cigarette industry to regulate. At the same time, it is also a good thing to be able to bring sales and distribution networks into unified and strict regulations.

At the same time, a large number of e-cigarette brands in the industry that have refilled their numbers may also face a new round of reshuffle and elimination after the “giant” enters the game. It can be said that e-cigarettes, as an industry that is difficult to “restricted”, strict regulations may promote the industry to really start to grow and become stronger.

 

2021 Q1 China e-cigarette industry development status and market research analysis report

Electronic cigarettes have become an innovative electronic consumer product, which is becoming more and more popular around the world. According to data from iiMedia Research, the size of China’s e-cigarette market in 2013 was 550 million yuan, and the market size increased to 8.38 billion yuan in 2020. The eight-year compound annual growth rate reached 72.5%. It is expected to exceed 100 in 2021 as 100 million yuan.

The potential users of e-cigarettes in China are large and the industry has a bright future

China’s e-cigarette market has expanded rapidly. The data shows that in 2013, the scale of China’s e-cigarette market was 550 million yuan, and by 2020, the size of China’s e-cigarette market will increase to 8.33 billion yuan, with an eight-year compound annual growth rate of 72.5%. IiMedia Consulting analysts believe that the current scale of Chinese smokers ranks first in the world, but the penetration rate of e-cigarettes is less than 1%, indicating that China’s e-cigarette industry has a broad development space. The market size is expected to exceed 10 billion yuan in 2021.

E-cigarette users are mainly young and middle-aged men, and smoking cessation is the main purpose of use

According to survey data from iiMedia Research, in 2021Q1, Chinese e-cigarette users are dominated by men, accounting for 64.9%; the age group is mainly young and middle-aged, accounting for nearly 70%. More than half of users believe that e-cigarettes can relieve their dependence on nicotine and smoke, and the diversified taste of e-cigarettes is also an advantage to attract users. In addition, battery life, convenience of oil change, and price are the main directions that users expect to improve e-cigarette products.

Heat-not-burn electronic cigarette has obvious advantages and is expected to become a new growth point in the industry

Heat-not-burn e-cigarette devices are products that are less harmful than traditional tobacco and have the closest taste, and are popular among users. Survey data from iiMedia Research shows that in February 2021, 35% of Chinese e-cigarette users prefer heat-not-burn e-cigarettes. User demand promotes the development of the product market. It is estimated that China’s heat-not-burn e-cigarette market will reach 2.30 billion yuan in 2021.

Market scale analysis of China’s e-cigarette industry from 2013 to 2021

Data show that in 2013, China’s e-cigarette market was 550 million yuan, and the market size increased to 8.38 billion yuan in 2020. The eight-year compound annual growth rate reached 72.5%. It is expected to exceed 10 billion yuan in 2021. China’s e-cigarette market The scale has expanded dramatically. IiMedia Consulting analysts believe that the scale of Chinese smokers ranks first in the world, but the penetration rate of e-cigarettes is only 0.6. The successive promulgation of tobacco control regulations across the country is also expected to accelerate the increase in penetration rate. Therefore, as the penetration rate of the e-cigarette market increases in the future, the scale of China’s e-cigarette market is expected to increase substantially.

Analysis of the number of enterprises in China’s e-cigarette industry in February 2021

The vast market development space of e-cigarettes has attracted many companies to enter the market. Data shows that China’s e-cigarette companies have grown rapidly from 45,457 in 2013 to 168,452 in 2020. As of February 4, 2021, there are 174,399 remaining e-cigarette companies in China. . From the perspective of growth rate, the growth rate of the number of Chinese e-cigarette companies is accelerating. The growth rate will reach 30.27% in 2020, and continue the rapid growth momentum. It is foreseeable that the number of industry companies will continue to increase significantly in the future, and the industry track will more be crowded.

Jinjia shares, a typical upstream e-cigarette industry enterprise: profitability

In 2019, Jinjia shares achieved operating income of 3.99 billion yuan, a year-on-year increase of 18.4%, maintaining three consecutive years of accelerated growth; net profit for the year reached 880 million yuan, a year-on-year increase of 21%. In the first three quarters of 2020, the company achieved revenue of 3.01 billion yuan, an increase of 4.5% compared to the same period of the previous year. The business expansion in 2020 has slowed down; during this period, the company’s net profit experienced a negative growth of 660 million yuan, compared with the previous year A decrease of 1.6% during the same period. The main reason for the decline in performance was the outbreak of the epidemic in the first quarter. The comprehensive unfavorable factors caused by the epidemic caused the company’s various businesses to have varying degrees of stage delays. As the China epidemic was effectively controlled and the company’s tobacco industry has made good progress, and the company’s overall operating conditions are in a steady state.

Analysis of driving factors of Chinese e-cigarette consumers in 2021Q1

The reasons why consumers choose e-cigarettes mainly focus on health and environmental protection, such as helping to quit smoking and quitting reactions. The data shows that “can alleviate dependence on nicotine”, “have many tastes” and “can reduce smoking withdrawal response” are the main reasons for attracting consumers to use e-cigarette products. The three accounted for 55%, 46%, and 38%. IiMedia Consulting analysts believe that e-cigarette brands tend to highlight the functions of e-cigarettes in terms of health and environmental protection when promoting products, and e-cigarette merchants can also highlight the characteristics of the product’s taste and make it a product selling point.

2021Q1 China e-cigarette product experience problem perception analysis

The data shows that the biggest concern of e-cigarette users when using products is the short battery life (46.8%), followed by continuous high temperature, poor material quality, oil leakage and battery short circuit. IiMedia Consulting analysts believe that at present, the country does not have relevant standards to define the nature of e-cigarettes, and product positioning can easily become an obstacle for consumers to use products. In addition, the development of the industry is still immature, the market lacks companies with outstanding comprehensive strength, has not formed a brand with a good reputation, and consumers lack confidence in product quality assurance.

Distribution of Chinese respondents’ willingness to recommend e-cigarette products in 2021Q1

Data shows that more than half of the interviewed users believe that e-cigarettes have a smoking cessation effect, and 54.1% of users said that they would recommend e-cigarette products to others, with a high willingness to recommend. On the whole, the proportion of users who choose to recommend among the interviewed users is relatively consistent with the proportion of users who agree that e-cigarettes have smoking cessation effects, and both are more than half. This shows that smoking cessation effects are the premise for users to recommend products.

Wuxin Technology: Analysis of Typical Examples of Chinese Electronic Cigarette Enterprises: Enterprise Introduction

Founded in 2018, Wuxin Technology is a leading electronic atomizer company in China; the company has opened more than 2,500 specialty stores nationwide and settled in more than 100,000 retail stores; and opened 8 specialty stores in Canada, Indonesia and other countries Stores, customers in more than 40 countries and regions around the world.

Smoore International: Enterprise Introduction

Smoore International Holdings Limited was established in 2009 and is a global leader in providing atomization technology solutions; according to Frost & Sullivan’s 2019 report, the company is currently the world’s largest manufacturer of electronic atomization equipment. In 2015, the company launched its own brand Vaporesso in the United States and expanded the market to Europe and Japan. In 2016, it launched the first generation of ceramic heating technology and applied it to its brand FEELM.

Intre Technology: Enterprise Introduction

Based on the independent innovation UDM model (also known as the ODM intelligent manufacturing model), Intre Technology mainly provides customers with the development and production of intelligent control components, innovative consumer electronics and other products, and provides intelligent manufacturing solutions for small and medium-sized enterprises. The company is also a secondary supplier of HNB electronic cigarette giant IQOS. It mainly provides plastic components such as charging boxes (MU) and heating rods (TSH), and provides assembly parts for IQOS’s primary suppliers Venture and Flex.

Development trend analysis 1: Industry regulatory policies become stricter

In November 2019, relevant state departments began to tighten the control of e-cigarettes. The introduction of the ban on online sales of e-cigarettes caused major e-commerce platforms to remove e-cigarette products overnight. Before the online sales channel was cut off, e-cigarette brands used online channels for shipments, which could avoid profit sharing among stores and distributors and reduce product costs. Therefore, under the influence of the ban, e-cigarette companies can no longer conduct online marketing, and the effect of publicity has been greatly reduced. At the same time, standards have been introduced in various places, which has ushered in a fierce reshuffle of electronic cigarettes.

Development Trend Analysis 2: Overseas Expansion of Electronic Cigarette Companies

With the strengthening of online sales regulation, some e-cigarette companies have begun to expand overseas. On December 5, 2019, Doo, a domestic e-cigarette brand, and Indigo, an e-cigarette distributor under the Kali Group of the United States, stated that they would establish a joint venture in the United States. In the same year, RELX also started to go overseas and achieved better performance in a short period of time. IiMedia Consulting analysts believe that e-cigarette companies going overseas is a good strategy to avoid policy risks, but they will also face different regulatory policies, cultural differences, environment, and youth addiction. Therefore, companies need to carefully study the domestic market and overseas The difference in the market will accurately position the brand strategy and lay a solid foundation for the future global market layout.

Another Dongguan counterfeit e-cigarette factory is seized

With the Spring Festival approaching, many lawbreakers in China are ready to move, intending to take advantage of various companies who’re too busy to take care of it around the Spring Festival, to make a fortune before the New Year, so illegal activities such as making and selling fakes are again rampant.

On January 6, 2021, the “Hound” anti-counterfeiting operation of the Goldreams e-cigarette was launched again. The Shilong Public Security Bureau smashed a counterfeit den in Chang’an Town, Dongguan City, and investigated and dealt with a large number of AIRBAR products of the best-selling disposable vape brand owned by Golfdreams.

Another Dongguan counterfeit e-cigarette factory is seized

During this operation, the public security agency seized the main members of the counterfeiting gang. After review, the main members of the counterfeiting gang were criminally detained, and the main responsible person Lei Kang x was pursued online.

Another Dongguan counterfeit e-cigarette factory is seized

It is understood that since its launch in 2019, AIRBAR, the brand of Golfreams, has continuously insisted on self-transcendence and innovation in quality and experience, won the support and trust of global e-cigarette users, and has become the world’s leading e-cigarette brand.

Another Dongguan counterfeit e-cigarette factory is seized

However, according to users’ complaints and reports, Golddreams has recently conducted in-depth investigations and found that many criminals have been shoddy and have manufactured and sold a large number of AIRBAR imitations, misleading and deceiving consumers, and seriously infringing on the interests of users and brand reputation.

Goldreams said that the “Hound” operation will continue to maintain a high degree of vigilance against counterfeiting behaviors and wait for the opportunity to destroy the counterfeit production and supply chain of counterfeit factories. The brand reminds consumers not to sacrifice their health and safety due to low prices, and to purchase genuine products with anti-counterfeit labels through official channels authorized by Golfremus. At the same time, colleagues in the industry are also called on to boycott counterfeit goods, resolutely defend corporate patents, and establish a genuine atmosphere.

Another Dongguan counterfeit e-cigarette factory is seized

Finally, Golfreams issued a severe warning to all gangs that illegally use corporate trademarks and patents and illegally manufacture and sell fakes:

“Immediately stop the production and sale of all products of Golfreams, otherwise it will reserve the right to pursue legal liabilities in accordance with the law, and conduct corresponding legal liabilities for the adverse effects of illegal sales. In addition, so far, Golddreams has not authorized any China sellers distribute products, including platforms such as Alibaba and Amazon.”

18,000 new e-cigarette-related companies established in China in 2020

According to the China Fund News, the tobacco stock sector in China, which has been silent for a long time, ushered in a collective rise last week. Due to the US stock listing of Wuxin Technology, the parent company of the China e-cigarette brand RELX brought a new wave of a surge in the vape field.

The Shenran Finance report pointed out that on the evening of January 22, the e-cigarette company RELX was officially listed on the New York Stock Exchange. This is China’s first listed e-cigarette brand. Prior to this, Smoore, known as the “first share of electronic cigarettes”, was listed on the Hong Kong Stock Exchange in July 2020, but Smoore is an e-cigarette manufacturer that provides OEM production for e-cigarette brands such as RELX. The successful listing of RELX means the birth of “China’s first electronic cigarette brand”.

According to the data of Tianyancha, a company database APP, there are currently 35,000 companies in China whose names or business scopes contain “electronic cigarettes, vaporizers”, and their status is e-cigarette-related companies that are active, existing, moving in, or moving out. In terms of business types, 52% of related companies are limited liability companies, and 46% of related companies are individual industrial and commercial households. In terms of registered capital, nearly 80% of e-cigarette-related companies have registered capital below 2 million.

China vape company registrations increased by 167% year-on-year in the first three quarters in 2020

From the perspective of industry distribution, nearly 90% of e-cigarette-related companies are distributed in wholesale and retail industries. In terms of geographical distribution, Guangdong has the largest number of e-cigarette-related companies, with more than 9,700, followed by Jiangsu with more than 4,000. Followed by Zhejiang and Shandong, there are more than 2,000 electronic cigarette related companies.

According to the data of Tianyancha, the annual registration of electronic cigarette-related enterprises in China increased sharply in 2020, and 18,000 related enterprises (all enterprise status) will be added throughout the year, a year-on-year increase of 270%. In terms of quarters, the fourth quarter increased the most, adding 10,000 e-cigarette-related companies.

The “China Electronic Cigarette Industry Value Insight Report 2020″ released by the Beijing News Think Tank pointed out that the emergence of electronic cigarette products promotes the rapid growth of enterprises related to the industry chain, and at the same time drives the expansion of the tobacco industry chain, which has a promoting effect on the tobacco industry to create a good industry ecology; And together with it to provide society with harm-reducing and safe electronic cigarette products. E-cigarette companies cut in from R&D, design, production, sales and other processes to reduce carbon dioxide and other gas emissions and energy consumption, which is of positive significance for China to achieve carbon neutrality goals and achieve ecologically sustainable development.

MR FOG vape cooperates with Shenzhen police to fight counterfeiting

Recently, MR FOG, a vape brand in the United States, announced the results of an anti-counterfeiting operation in China conducted in conjunction with Shenzhen police.

Before the operation, the police and the MR FOG brand had a large number of clues through e-commerce channels and supply chain channels. After receiving the exact on-site production information of the whistleblower, they immediately launched Operation Thunder.

A large number of semi-finished and finished products bearing the MR FOG brand trademark were seized in this operation. A large number of product packaging and e-liquids to be used were also stored in the warehouse, and the amount involved was huge.

MR FOG vape cooperates with Shenzhen police to fight counterfeiting

It is reported that MR FOG has a large number of loyal fans in the United States in just two years with its unique flavors, strict product quality control, and keen insight into market trends. With the increasing influence of the brand, China counterfeit bases have begun to rush to imitate the brand’s products in an attempt to make fake products.

Due to the lack of the production environment and quality control system of the counterfeit factories, the quality of fake products is not guaranteed, the overall production environment is dirty, chaotic, and poor, and the sanitary conditions are unsightly, which poses a great threat to the physical and mental health of consumers.

MR FOG vape cooperates with Shenzhen police to fight counterfeiting

According to reports, all persons involved in the case have been arrested by the Shenzhen Public Security Bureau and are awaiting subsequent sentencing.

The MR FOG brand stated that e-cigarettes are products that need to be ingested into the human body. Fake products damage not only the reputation of the brand company, but more importantly, they threaten the personal safety of end consumers; fakes made in China contaminate the fame of made-in-China products. As long as the fake products do not disappear for a day, the company’s investment in anti-counterfeiting will be unlimited, and the anti-counterfeiting action will never end.

China e-cigarette industry current status and future

In recent years, major participants in the e-cigarette industry such as RELX, SnowPlus, Moti, Yooz, Smoore International have enjoyed the dividends brought about by the rapid development of the industry. However, since e-cigarettes were banned from online sales on November 1 last year in China, rumors about e-cigarettes were overwhelming, and many small companies in the industry could not hold up declaring bankruptcy, leaving behind some mainstream big brands.

Most of the remaining big brands are following the “brand authorized store” model, and this model happens to be sought after by e-cigarette enthusiasts. For a while, the number of “brand authorized stores” has grown rapidly. Taking RELX as an example, it is reported that in the next three years, it will spend 600 million to open 10,000 stores. This model enables the China “brand authorized store” that formal cigarette channels to gradually expand in scale.

But how long can such rapid growth last? Although new types of tobacco are sought after by young people, they may reach the ceiling of penetration. The e-cigarette industry has a low threshold, many players participating in the competition, and serious homogeneity, which has led to the continuous narrowing of the incremental market and intensified competition in the stock market. It will be difficult to maintain the rapid growth in recent years in the next few years.

Only through continuous improvement from raw materials, maintaining high and stable quality, or highlighting differentiation to break through the ceiling restrictions and find new opportunities, it is possible to be outstanding

△Current status of the electronic cigarette industry

Compared with the traditional tobacco market, the concentration of the electronic cigarette market is relatively scattered. E-cigarette companies often launch disposable products with different flavors and refill products to meet the rigid needs of consumers. According to the price points of various brands currently understood, disposable products are mainly concentrated in the low-end price range of 39-49. The products are mainly concentrated in the mid-end price range of 199-399, and there is little difference in product price between companies.

The proportion of R&D investment in the e-cigarette industry is generally not high, most of which are OEM products, which actually come from the same factory. Both experienced tobacco players and new e-cigarette enthusiasts can easily participate in industry competition. Taking RELX as an example, it has been continuously improving in performance, widening the gap with other brands.

However, many e-cigarette companies currently do not have too many technical barriers in design or manufacturing. First, OEM has become a common phenomenon in the industry; second, with the current supply chain level, any new product promotion plan will usher in more than a dozen competitors in a short time. Under this situation, how will China e-cigarette brands maintain rapid growth?

△How far can the industry go?

As the incremental market of the e-cigarette industry continues to narrow and competition in the stock market intensifies, there has been a trend of evolving into a price war. With the launch of e-cigarette sticks for 9.9 yuan by yooz, some mainstream brands have continued to follow up and launched disposable e-cigarettes at the same price. Take disposable e-cigarettes as an example. The overall cost of having built-in batteries, chips, and circuit boards is not low, but the selling price is 9.9 yuan, basically no profit at all. How far can the price war industry go?

△Where are the new opportunities?

I believe that e-cigarette companies can start with raw materials and continue to innovate and improve the disadvantages of the original e-cigarettes, and find new opportunities in the fierce competition.

One is to start with nicotine.

In the future, synthetic nicotine can be used to eliminate the restrictions imposed by traditional nicotine. Synthetic nicotine has the same molecular formula as natural nicotine. As an additive, it may not be included in the e-cigarette regulations of the Food and Drug Administration.

The second is to highlight differentiation.

There are more and more similar competing products, and consumers will only choose from the brands they remember when making decisions. You can choose to use a differentiated strategy in product positioning and price system, find your own advantages and sell points, and carry out continuous marketing maintenance. Only when you become a representative of the category can you get an initial victory.

If the company’s innovation ability can continue to export, then the product will have a lot of room for growth; conversely, the ceiling may appear.

China young vapers aged 18-29 have increased significantly between 2015 and 2019

Between 2015 and 2019, the number of adult e-cigarette users in China has increased significantly. From 2015 to 2016, the use rate of e-cigarettes among Chinese adults in the past 30 days was estimated to be 1.3%; from 2018 to 2019, the use rate of e-cigarettes among Chinese adults rose to 1.6%, an increase of 0.3%, and the number of new adult e-cigarette users was approximately 3.35 million. Among them, 3.2 million are men and 150,000 are women. Among them, the use rate of e-cigarettes among young and middle-aged adults has increased significantly, increasing by 0.7% in 4 years. The use rate of e-cigarettes among young adults aged 18-29 has increased significantly from 2.0% in 2015-16 to 2.7% in 2018-19.

Lower incomes, increased medical expenses, smoking has increased poverty.