Shenzhen: launching anti-drug investigation in the field of electronic cigarettes

To prevent drug-related risks in the logistics and delivery industry and electronic cigarette companies, on August 9, the Anti-drug Office of Xixiang Street, Bao’an District, Shenzhen organized a mobilization and deployment meeting for anti-drug blocking and source interception inspections in the logistics and delivery industry of Xixiang streets and a mobilization and deployment meeting for the investigation and rectification of electronic cigarette companies.

Comrade Yao Wenqun, a member of the Sub-district Party Working Committee, attended the meeting. At the deployment meeting, Xixiang organized a leading group for the investigation and remediation work, and determined the investigation methods and specifications.

First of all, with the leadership of the community, organize the staff of the Narcotics Office, the community police, and the grid staff to carry out a one-week pull-net investigation on the logistics and delivery companies and e-cigarette companies in the jurisdiction, and have a thorough grasp of the logistics and delivery companies in the jurisdiction. The base number of its branches and terminal outlets, grasp the enterprise scale of e-cigarette companies, the source of e-liquid, etc.

Then set up the basic accounts one by one, focusing on the comprehensive analysis of basic information such as company name, registered address, legal representative, main contact person and method, business type, and company size.

At the same time, extensive publicity is carried out on the relevant laws and regulations of the company’s operations, the types of new drugs, and the hazards, so that logistics companies can sign a letter of commitment and send a letter to e-cigarette companies to strengthen the company’s awareness of law-abiding operations from multiple angles.

It is reported that in actual operations, Xixiang Sub-district investigated a total of 498 e-cigarette companies and 385 logistics delivery companies.

Telling Holdings’ semi-annual report shows a great increase in the e-cigarette business

On July 29, Telling Holdings released the 2021 semi-annual report. The report shows that the company’s operating income in the first half of 2021 was 37.556 billion yuan, a year-on-year increase of 26.64%; the net profit attributable to shareholders of listed companies was 86.961 million yuan, a year-on-year increase of 19.3%; the net profit deducted from the parent was 76.9805 million yuan, a year-on-year increase An increase of 168.42%; basic earnings per share of 0.085 yuan per share.

The company said that in the first half of the year, the company continued to focus on its industrial Internet strategy, fully integrating grid channels with Internet platforms, and striving to create an efficient omni-channel social marketing network.

According to the data, Telling Holdings is mainly engaged in smart terminal distribution business, lottery business, retail e-commerce business, mobile resale and mobile Internet business. During the reporting period, the company’s net cash flow from operating activities was -1 billion yuan, a year-on-year decrease of 338.57%. The company said it was mainly due to the shipment of the advance payment at the end of the previous year.

It is worth noting that the ratio of net cash flow/net profit from Telling Holdings’ operating activities has continued to decline. The semi-annual reports for 2019, 2020, and 2021 show that the company’s operating activities net cash flow/net profit ratio is 14.72, 5.81, -11.74, respectively, and the quality of earnings is showing a gradual decline.

The 2021 semi-annual report shows that the profitability of Telling Holdings’ main communications business is very weak, and the gross profit margin of communications product sales is only 2.11%. In order to create new profit growth points, in the first half of this year, Telling Holdings began to accelerate the deployment of e-cigarette business, taking e-cigarette business as the company’s second life curve and intends to become the first channel brand in the electronic atomization industry.

Telling Holdings released a semi-annual report: The gross profit margin of the e-cigarette business far exceeds that of the main communications business!

Prior to this, the company signed a strategic cooperation agreement with the top e-cigarette brands Boulder and vvild, becoming the only national representative of Boulder and vvild. The two parties mainly cooperate in offline retail scenarios and conduct omni-channel sales. Telling Holdings is responsible for expanding the market for branded products and gradually increasing the market share of branded products. Recently, Telling Technology has joined hands with the electronic atomization brand vitavp, becoming the national representative of the vitavp brand.

According to iiMedia Consulting’s data, affected by factors such as tax rates, price increases, and strengthened national controls, the development of China’s cigarette market has slowed down, while the e-cigarette market has accelerated its expansion. The market size reached 7.86 billion yuan in 2019 and is expected to exceed 9 billion yuan in 2021.

IiMedia Consulting analysts believe that although the current market size of the e-cigarette industry is expanding year by year, due to the large group of traditional tobacco consumers in China and the country’s gradual tightening of e-cigarette regulations, the industry’s Development prospects should be cautious.

As of June 30, Telling Holdings has opened 1,414 stores through investment promotion. In the first half of 2021, the e-cigarette business of Telling Holdings achieved revenue of 26.365 million yuan, accounting for 0.07% of total revenue. The gross profit margin was 23.96%, which was 21.85 percentage points higher than the gross profit margin of the main business communication business.

Independent economist Wang Chikun told reporters that the tobacco industry has always been a major tax collector in my country, and the inclusion of regulation this time is also to prevent the disorderly impact of e-cigarettes on traditional tobacco. In this context, the government is bound to strictly approve the issuance of e-cigarette qualifications.

Wang Peng, an associate professor at Renmin University of China, told reporters that from a macro perspective, e-cigarettes face a very large policy risk. Whether from a social or medical perspective, e-cigarettes will not be promoted in a very positive manner. Public opinion events are very detrimental to the development of the entire industry.

For the channel business, there are also no small business risks, such as how to avoid publicity and sales to minors, and how to grasp the standards in advertising to meet the requirements of the regulation layer.

Generally speaking, the barriers to entry of the e-cigarette industry are relatively low, and there are fewer very attractive brands. A lot of publicity, store design, and a lot of time and labor cost are required. To a certain extent, store fixed cost investment It is also higher, leading to low profits.

Wang Peng believes that the current homogenization competition between e-cigarette brand owners and distributors is relatively serious. Either fight for price or fight for marketing, which will easily lead to bargaining and low profit margins. The future development of the e-cigarette industry must be towards compliance and branding, with its own characteristics and differences, and at the same time strengthening industry self-discipline and regulation.

Reshuffle of the e-cigarette industry is accelerating in China

On May 26, the National Health Commission issued the Report on the Health Risks of Smoking in China 2020, which caused an uproar in the industry for a while. However, this does not affect the deep involvement of major capitals in the upstream and downstream of the vape industrial chain and continuous expansion of production.

The report reveals that e-cigarettes are unsafe?

The publication of the report may affect the enthusiasm of merchants to open vape stores and their yearning for the vape industry. However, the merchants are currently most concerned about shipments.

In addition, regarding the e-cigarette part of the report, China Central Broadcasting Network and Securities Times have issued questions about it. Among them, the Central Broadcasting Network pointed out that for the merits and demerits of e-cigarettes, we need to compare the pros and cons of the evidence, so as to provide all parties in the dispute with a fair opportunity to compete, instead of just believing that e-cigarettes are harmful. Securities Times also questioned the timeliness and comprehensiveness of the harmful evidence of e-cigarettes listed in the report.

The secretary-general of the Electronic Cigarette Association told reporters, “The industry has been constantly innovating. In terms of quality and safety, taste experience and other aspects, technology upgrades and consumer stickiness are increasing. Therefore, the secondary market stock fluctuations and downstream dealers’ The worries are understandable. They don’t know much about industry development laws and regulatory policies.”

Capital catalyzes offline expansion

For Chinese e-cigarette brands, offline store expansion is currently one of the main tasks.

The reporter visited several city business districts in Chongqing and found that there are many e-cigarette brand stores. A total of 7 e-cigarette stores have been opened in the underground passage from Shidaitian Street, Daping, Yuzhong District, to the Shiyoulu Station of Rail Transit, two of which are of the same brand. On the most densely populated section of e-cigarette stores in this channel, two e-cigarette stores are relatively open. One store is separated from the same side by only one storey and the third e-cigarette store is located, and the fourth store is less than 10 meters away from these three stores.

Reshuffle of the e-cigarette industry is accelerating in China

Two e-cigarette stores opened relatively

The reporter noticed that at present, capital has entered the upstream and downstream links of e-cigarettes, and a complete industrial chain has been formed. In the upstream link, China Boton and Huabao International, which provide flavors and fragrances, Smoore International, which provides vaping kits, and many subcontractors such as Jinjia, Yinghe Technology, Changying Precision, etc.; brand owners include Bode, etc.; sales channel links, Ai Shide, Tianyin Holdings, etc. have all intervened, and will continue to expand the number of stores in the future.

Different from other fields, joining an e-cigarette brand does not require an initial fee, and the threshold is very low. Many e-cigarette brand investment personnel said that to join with zero threshold, only need to distribute the goods. According to another industry insider, many e-cigarette brands, including decoration costs and exhibition equipment, can be refunded through stock replenishment on a monthly basis.

The person in charge of investment promotion for a well-known e-cigarette brand in Henan mentioned that many specialty store owners are young people and they are e-cigarette consumers themselves, but they don’t have much business capabilities, which leads to low survival rates in stores. “At the same time, most e-cigarette brands adopt the mode of contract processing. At the peak of 2019, there will be two to three thousand e-cigarette brands in the China market, with varying quality. Now they are increasingly concentrated on top brands.” He said.

From the current point of view, the industry is concentrating on leading companies. Smaller e-cigarette brands have had a hard time, and stores have begun to close in the second half of the year. The biggest plan of the brand is to expand the number of stores, and many provinces are under great pressure. According to the information he has, many channel merchants even sell e-cigarette products on the basis of a catty in order to dump the goods.

The future of electronic cigarettes in China

Many related persons and industry insiders of listed companies involved in the e-cigarette business told reporters that the stricter the external regulation, the higher the degree of industry purification, and the more profit-seeking space for capital.

A well-known e-cigarette investment promotion staff in Henan mentioned that many people value the business opportunities of e-cigarettes, so they go to Shenzhen to find an OEM factory, but they do not have R&D capabilities themselves, and they can’t control product safety well. Such brands will soon be eliminated.

However, the Frost & Sullivan report shows that 90% of the world’s e-cigarettes are produced in China, but 90% of the e-cigarettes produced in China are for export. In other words, for upstream manufacturers, changes in the China market are not enough to destroy their foundation. It can adjust the China and foreign markets according to market conditions.

Sikary, a subsidiary of Yinghe Technology, is the case. Yinghe data public number shows that in 2019, the sales of Sikary in China market accounted for 34.28%, and the international market accounted for 65.72%. However, based on the huge space in the US market, Sikary began to set up a sales team in the United States in the second half of 2019, and will increase the proportion of the original business from 1.54% to 33.43% in 2020.

China e-cigarette brands, distributors and specialty store operators may bear more pressure.

It takes a long process for China e-cigarette brands to enter overseas markets. The detailed information in the prospectus of Smoore International shows that, according to US regulations, all manufacturers of electronic nicotine delivery system products are required to submit pre-market tobacco applications to the Food and Drug Administration (FDA).

Pangu Think Tank Senior Researcher Jiang Han told reporters that e-cigarettes can be said to be a trend in the current development of the entire tobacco market. More and more tobacco companies, including state-owned tobacco companies, are beginning to develop in the direction of e-cigarettes.

From a long-term perspective, whether e-cigarettes can have a good market development prospect depends mainly on whether the market can prove their safety. If it can be determined that e-cigarettes are relatively safe, then its development prospects are still promising. Therefore, the future e-cigarette brand must increase investment in research and development and produce more products of higher quality, so that it will be more competitive.

The e-cigarette industry is in a stage of continuous iteration, and the market is constantly concentrating on leading companies. It is foreseeable that the electronic cigarette industry will face a new round of reshuffle in the second half of the year.

E-cigarette maker Sigelei terminates listing on the NEEQ

On May 14, according to news from Jiwei, the stock transfer system announcement, Guangdong Sigelei Electronic Technology Co., Ltd. (stock abbreviation: Sigelei) recently submitted an application to the agent company to terminate the listing of shares on NEEQ. According to the provisions of the “National SME Share Transfer System Business Rules (Trial)”, agent company now decides to terminate the listing of its shares from May 13, 2021.

E-cigarette maker Sigelei terminates listing on the NEEQ

Regarding the reasons for the delisting, Sigelei said that in order to adapt to the company’s long-term strategic development plan, to meet the company’s own business development needs, and to integrate resources, improve operating efficiency, and reduce operating costs, after careful consideration, the company shareholders have a strong willingness to terminate the listing; the company intends to apply The company’s shares were terminated from the national SME share transfer system.

According to data, Sigelei was established in 2013 and listed on the New OTC in August 2017. It is the chairman unit of the Electronic Cigarette Industry Committee of the China Electronic Chamber of Commerce. It is an international brand enterprise integrating R&D, production, sales and service. A leader in the global e-cigarette industry; Sigelei has incubated six world-class brands such as SIGELEI, SNOWWOLF, FUCHAI, VCIGO, KAOS, COMPAK, etc. after 10 years of accumulation in the international market. Canada, Australia, Russia, the Middle East and Southeast Asia have become the leader in the global electronic atomizer industry.

In 2020, Sigelei will strongly return to the Chinese market and establish Shenzhen Wuji Technology Co., Ltd.; committed to building a global leading brand of atomization technology! Let smokers around the world choose a healthier lifestyle.

In the first half of 2020, Sigelei achieved operating income of RMB 33,179,400, a decrease of 55.23% from the same period last year, and operating costs of RMB 31,137,400, a decrease of 44.25% from the same period of the previous year; the company’s net profit was -9,656,300 yuan, a decrease from the same period of the previous year. 466.45%.

20,000 counterfeit e-cigarettes found and seized in a factory in Shenzhen

Recently, the Guangming Regulation Bureau of the Shenzhen Municipal Market Regulation Administration received clues that there is an illegal processing factory that produces and sells fake and inferior electronic cigarette products in Li Songling Community, Gongming Street, Guangming District.

The Guangming Regulation Bureau launched a thunderous attack, and combined with the Guangming Tobacco Bureau, the Guangming Public Security Bureau and the Gongming Police Station to conduct a surprise inspection of the illegal processing plant. After counting, the unlicensed processing factory found nearly 20,000 counterfeit and inferior electronic cigarette products.

“Unauthorized use of trademarks constitutes the crime of counterfeiting trademark registration”

In this operation, a large number of suspected infringing e-cigarette accessories, packaging boxes, labels and e-cigarette products were seized at the scene. 6 workers were engaged in e-cigarette assembly and production. Law enforcement officers quickly controlled the relevant personnel and sealed off the scene.

After preliminary on-site inventory and appraisal, a total of nearly 20,000 finished e-cigarettes suspected of infringing on the registered trademarks of e-cigarettes “maskking” and “KangVape”, as well as a batch of e-cigarette accessories, packaging boxes, and labels, were seized. The Guangming Public Security Bureau took away 6 suspects at the scene.

After investigation, the parties involved in the use of the same trademark on the same product without the permission of the registered trademark right holder have been suspected of constituting the crime of counterfeiting the registered trademark. At present, the Guangming Regulation Bureau has transferred the case to the public security organs for handling in accordance with the law, and the case is under further investigation.

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.