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.

Chinese e-cigarette companies have two major advantages

At present, there are approximately one billion traditional cigarette consumers in the world. However, with the increasing strictness of tobacco control in various countries and the awakening of consumers’ health awareness, the traditional cigarette market has continued to decline. At the same time, the market size of electronic cigarettes based on “harm reduction” shows a good development trend.

Traditional tobacco giants actively transform and lay out new e-cigarette markets

On the whole, the global e-cigarette (including e-cigarettes and heat-not-burn e-cigarettes) market is expanding. The growth rate slowed down in 2019, but the proportion is still increasing. According to Euromonitor data, global e-cigarette product sales in 2019 were approximately US$48.55 billion, a year-on-year increase of 19.40%, and the growth rate was significantly slower than in 2018. But at the same time, the penetration rate of e-cigarette products has continued to increase, and its proportion of all tobacco products has increased from 2.29% in 2014 to 5.94% in 2019.

Specific to vapes, the global sales of electronic atomized cigarettes reached US$20.2 billion in 2019, a year-on-year increase of 28.43%. At present, the consumption of electronic atomization cigarettes is mainly concentrated in the United States, the United Kingdom and other European and American countries, which account for 47.77% and 13.40% respectively, while China’s 6.85%. This is related to the relatively late development of China’s e-cigarette market.

However, despite the influence of policy and regulatory tightening factors, the global e-cigarette market is currently showing a good development trend after undergoing adjustments. In a sense, this is because e-cigarettes provide more choices for traditional cigarette consumers. In the current market structure, electronic cigarette products represent the future global mainstream development trend in this field. This can be seen from the active and rapid deployment of the four major tobacco companies in the electronic cigarette market.

The four major tobacco companies in the world, Philip Morris International, British American Tobacco, Japan Tobacco, and Imperial Tobacco occupy the market by acquiring and launching its own brands; its e-cigarette products (including e-cigarettes and heat-not-burn e-cigarettes) account for revenue Reached 18.7%, 4.36%, 3.17%, 3.56% respectively, showing a rising trend.

The dual advantages of China’s e-cigarette industry chain

Although China’s e-cigarette market has developed late and the market scale is small, Chinese e-cigarette companies can still use the two-wheel drive of industrial chain status and brand development to enhance the value and position of Chinese e-cigarette companies in the global e-cigarette industry chain.

First of all, Chinese e-cigarette companies are in an absolute leading position in the middle and upper reaches of the industry chain. China is the world’s largest e-cigarette production base. In 2019, 218 countries and regions around the world purchased e-cigarettes from China. On the whole, China’s e-cigarette industry has formed a complete industrial chain from upstream raw material suppliers to midstream e-cigarette designers and manufacturers, and downstream sales companies. This is a big advantage for Chinese e-cigarette companies. This is conducive to its rapid iteration of products and the construction of a whole industry chain barrier integrating R&D, design and production.

In particular, e-cigarettes are technology- and product-driven products, which are obviously driven by market demand. Therefore, the product experience has a great influence on consumers, which determines whether the product can be welcomed by the market and consumers.

In addition, although Chinese e-cigarette manufacturers mostly use the OEM/ODM model to produce for international brands, these models help domestic companies to accumulate rich technology and supply chain experience. In other words, long-term foundry experience, technological precipitation, and industrial supply chain aggregation have enabled domestic companies to have advantages in cost control and management, rapid product iteration and innovation, and technological breakthrough and innovation advantages compared with international companies. Conducive to the transformation of some e-cigarette manufacturers to build their own brands.

In addition to manufacturing advantages, Chinese e-cigarette companies have another advantage in brand building. In addition to the cost-effective advantages brought by a complete supply chain system, because Chinese companies tend to pay more attention to consumer experience, especially the experience accumulated in the consumer electronics and fast-moving consumer goods market, this will be able to transform into the advantages of Chinese e-cigarette companies and gain insight into overseas The needs of consumers of different economic levels and cultural environments have created e-cigarette products that better meet the needs of local consumers.

Explore new paths for Chinese brands to go overseas

What’s more noteworthy is that among the sources of e-cigarette brands in my country, some companies come from Internet companies in other fields. Based on Internet thinking, these companies are driven by innovative technologies and user experience from the perspective of users. They are good at industrial chain integration, and their products can also be iterated quickly. RELX is now the leader in this regard. RELX is currently the largest e-cigarette brand in China. As of the end of 2019, it has entered 43 countries including Canada, the United Kingdom and New Zealand, and its overseas income has reached 25%, and it is still growing.

In addition to RELX, whether more Chinese e-cigarette companies can open the international market is of special significance to the Chinese e-cigarette industry. Yao Jianming, a professor at the Business School of Renmin University of China, believes that a brand cannot be cultivated without a consumer market. In the current domestic policy, it is unrealistic for e-cigarette brands to cultivate strong brands in China first. This is also the difference between e-cigarettes and smart phone brands such as Xiaomi and Huawei. These brands have strong consumer markets and crowds in China, and they have mature brand advantages before going overseas.

Therefore, in this case, if proper control and Chinese e-cigarette brands can create well-known brands equivalent to Xiaomi and Huawei in overseas markets, it will be a good reference for other Chinese brands to go overseas. This means the formation of new routes for technological products to go to sea.

On the whole, if China’s e-cigarettes are to gradually increase their value and status in the global industrial chain, they need to rely on its advantages in the industrial chain, as well as domestic independent brands that are catching up, and achieve the goal with the “industrial chain + brand” two-wheel drive The goal of enhancing the value of the industry.

China e-cigarette companies enter the certification stage

At the 4th International Electronic Cigarette Industry Summit Forum, the China Electronics Chamber of Commerce (CECC) and the China Electronics Standardization Institute of the Ministry of Industry and Information Technology (CESI) issued the first batch of China e-cigarette appliance certifications to 14 e-cigarette companies, the Electronic Cigarette Industry Committee of the China Electronics Chamber of Commerce, and the Corporate Credit Management Office of the China Electronics Chamber of Commerce have issued corporate credit compliance certificates to 39 companies.

E-cigarette companies once again have a new industry “identity” after the China Electronics Chamber of Commerce issued two group standards “General Specification for Electronic Cigarette Products” and “E-cigarette Liquid Specification” in 2017.

In the past decade or so, China’s e-cigarette standard construction has been in a blank area, and most of the company’s production has followed the standards of exporting countries. With the rise of the China market, the demand for standards has become increasingly urgent. It realizes zero breakthrough in industry quality management work.

After three years of trial implementation of these two standards, the certification requirements of the China National Certification and Accreditation Administration Commission are mature. To this end, CECC and CESI jointly launched the “China Electronic Cigarette Apparatus Testing and Certification”.

China e-cigarette companies enter the certification stage

Lin Hanzhong, vice chairman of the Electronic Cigarette Committee of the China Electronic Chamber of Commerce, introduced that the work aims to provide consumers with a recognizable basis for product quality and safety, promote enterprises to improve product quality and safety, standardize development, and promote the construction of industry quality standard systems. Companies that pass the certification will be awarded a certificate of authorization to use the “Anxing Quality” logo. Consumers can quickly identify them based on the logo and choose products that are assured.

China e-cigarette companies enter the certification stage

It is reported that the first batch of 13 electronic cigarette vaping appliance companies, 17 products, 1 e-liquid company, and 1 product passed the “Anxing” certification.

China offline channels: collective store form, specialty store subsidy

“Collective store form, specialty store subsidy”-the image store policy that has been popular with dealers in China a few days ago has begun to bear fruit.

According to analysis by industry insiders, this kind of policy with high subsidies and flexible operation will likely affect the two distinct policy forms of “collection stores” and “specialized stores” in the current electronic cigarette industry.

China offline channels: collective store form,  specialty store subsidy

According to many offline owners who have opened specialty stores, many brands have begun to tighten investment and even began to give priority to the supply of goods to direct stores.

Many well-known brands even broke the regional protection policy stipulated earlier and further reduced the protection scope of the store area.

What will be the offline trend of electronic cigarette stores in the future? We will wait and see.

Four successive fire disasters in China’s e-cigarette companies in November

At 06:30 on November 10, a fire broke out in a factory in Yulu Meijing Industrial Park, Yuchang East Road, Guangming District, Shenzhen. According to the Shenzhen Fire Bulletin, a fire broke out in a warehouse on the 3rd floor of an e-cigarette company where finished e-cigarettes were stored, and the scene was filled with black smoke. After the open flame was extinguished in time, the fire department organized a smoke exhaust, and there were no casualties in the accident. The fire area and the cause of the fire are under investigation.

Previously, there were also three fires in Bao’an, both in the electronic cigarette industry.

At 3 o’clock on September 28, a fire accident occurred in the lithium battery warehouse on the third floor of Yuepai Technology Co., Ltd. (mainly engaged in electronic cigarette products) on the third floor of Yanluo Street

Four successive fire disasters in China's e-cigarette companies in November

At 19:00 on October 5, a fire accident occurred in the e-cigarette production workshop on the fourth floor of a Shenzhen Technology Co., Ltd. in Shadon Street. The fire-related lithium battery supplier was supplied by a New Energy Co., Ltd. in Huizhou. The battery model was 173539.

Four successive fire disasters in China's e-cigarette companies in November

At 2 o’clock on October 10, a disaster occurred in the electronic cigarette battery warehouse on the fourth floor of Shenzhen Pinsuo Technology Co., Ltd. (mainly engaged in electronic cigarettes), Shajing Street. The supplier of lithium batteries involved in the fire was Dongguan Jinhui Power Technology Co., Ltd. The battery model is 16350.

In response to the current market situation, the Guangdong Electronic Digital Industry Association plans to launch the electronic cigarette battery group standard in the near future to promote the high-quality and healthy development of the industry.

PS:

The author himself also bought some disposable vapes recently, it’s from a famous brand. After 4 or 5 puffs, the vape device body starts getting very hot. Luckily, the author found it early and throw it right away from his pocket. In a minute, it starts producing smoke and gets on fire. It’s just a 300 mAh battery inside the disposable. It would be better to call it a lighter. As to the brand, the author doesn’t want to disclose it.

China Electronic Cigarette Committee and Shenzhen Customs explore joint anti-counterfeiting mechanism to protect corporate intellectual property rights

Yesterday morning, Secretary-General Ao Weinuo of the Electronic Cigarette Industry Committee in China and his party arrived at Shenzhen Customs, and exchanged views with Deputy Director Chen Hua of Shenzhen Customs Comprehensive Business Office, Section Chief Li Jian of Intellectual Property Protection Division, and Deputy Section Chief Wu Xianjie of Intellectual Property Protection . There are also three corporate representatives from the vice-chairman unit: Shenzhen GR Technology Co., Ltd. representative Zhu Xiaoling (VOOPOO brand), Shenzhen Wuxin Technology Co., Ltd. representative (RELX brand) Wu Zhongyang, Shenzhen Yijiate Technology Co., Ltd. representative ( aspire brand) Zhu Hailin.

First of all, Secretary-General Ao introduced to customs leaders: the background of the Electronic Cigarette Committee and the various tasks that have guided the development of the industry since its establishment. China is the birthplace of e-cigarettes and the world’s largest producer and exporter. Shenzhen is China’s main e-cigarette product manufacturing center and distribution center. 95% of the products are exported to 40 countries including Europe and the United States. It can be seen that Shenzhen As a pioneering demonstration zone of socialism, it has the advantages of pioneering, innovative, and daring to experiment. There are more than 20,000 e-cigarette patents worldwide, of which Chinese private enterprises account for 87.3%. China’s e-cigarettes already have a global leading position with independent technology, patents, and production capacity integration. In 2019, the export value of e-cigarette products was about 43.8 billion yuan. Affected by the epidemic this year, the export of e-cigarettes is still growing against the trend. Especially in the second half of the year, the number of orders from various enterprises has surged, which is not easy. As an export-oriented e-cigarette industry, the number of cases of counterfeit trademarks and infringement of products has recently increased. The committee requested that an effective anti-counterfeiting mechanism be established with Shenzhen Customs to implement the protection of intellectual property rights.

e -cigarette shenzhen counterfeit custom

After listening to the relevant introduction and demands of Secretary-General Ao, Deputy Director Chen Hua of Shenzhen Customs Integrated Business Department expressed his affirmation of the achievements of e-cigarette exports. As the import and export regulation and management agency, the customs protects intellectual property rights, which can effectively stop illegal acts of importing and exporting infringing goods. While continuously strengthening the protection of intellectual property rights, Shenzhen Customs has established a sound enforcement mechanism for customs protection of intellectual property rights. However, most companies have weak awareness of intellectual property protection, which leads companies to ignore the customs protection of intellectual property rights. Section Chief Li Jian of the Intellectual Property Protection Division mentioned that if an enterprise requires the customs to protect its intellectual property, its intellectual property rights should be filed with the customs department. After approval, the customs department will issue a customs protection record certificate for intellectual property rights. It will maintain communication with the committee, strengthen publicity and guidance to enterprises, explore effective protection mechanisms, and effectively improve the awareness and ability of enterprises to protect their own rights, combat counterfeiting, and promote the healthy development of foreign trade.

At the meeting, three business representatives in the same industry introduced the export situation of their respective companies and recent cases of anti-counterfeiting and rights protection to the customs leaders, and put forward relevant suggestions. They also look forward to actively linking with the customs department under the organization of the Electronic Cigarette Committee. Form an effective anti-counterfeiting mechanism, safeguard corporate interests, and standardize the industry. Finally, they express their respect and gratitude to the leaders of Shenzhen Customs for their warm reception and the high-quality and efficient service of Shenzhen Customs.

Since the establishment of the Electronic Cigarette Committee in China, it has always been responsible for guiding the development of industry standards. Every year, it holds an industry standard development promotion and implementation meeting, and invites leaders of the customs department to carry out policy publicity and implementation for member companies on the spot. The effect is remarkable. The follow-up will also continue to lead the company to develop towards standardization. However, it is still impossible to avoid the frequent occurrence of plagiarism and infringement in the industry. On the one hand, it has to deal with the 337 lawsuit initiated by the United States, which has caused considerable pressure on enterprises. At present, some private-brand companies still do not understand the importance of applying to the customs for intellectual property protection, and their awareness of rights protection is weak. Only when companies work with the customs to form an anti-counterfeiting mechanism can they effectively protect their intellectual property rights. The Electronic Cigarette Industry Committee will actively establish an effective mechanism with Shenzhen Customs to jointly provide strong support for enterprises in protecting intellectual property rights.

China’s adult e-cigarette use rate has increased significantly from 2015 to 2019

The Lancet Public Health recently published a joint study from the research team of Zhou Maigeng from the Center for Chronic Noncommunicable Disease Control and Prevention of the Chinese Center for Disease Control and Prevention and Beijing Normal University. The study reports the e-cigarette use rate and related factors in the past 30 days among Chinese adults over 18 years old from 2015-16 to 2018-19.

This study reports for the first time the current status and changing trends of adult e-cigarette use in China in recent years, and provides baseline data for the evaluation of China’s e-cigarette sales restriction policy.

The research results show that between 2015 and 2019, the number of e-cigarette users in China has increased significantly. From 2015-16, the e-cigarette use rate among Chinese adults in the past 30 days is estimated to be 1.3%, of which 2.5% for men and 0.1% for women. From 2015-16 to 2018-19, the adult e-cigarette use rate in China rose from 1.3% to 1.6%, and the number of new adult e-cigarette users was about 3.35 million, of which 3.2 million were men and 150,000 were women.

Figure 1: Prevalence of past 30-day e-cigarette use (A) and e-cigarette awareness (B) in 2015–16 and 2018–19 among Chinese adults, overall and in current smokers
Figure 1: Prevalence of past 30-day e-cigarette use (A) and e-cigarette awareness (B) in 2015–16 and 2018–19 among Chinese adults, overall and in current smokers

Data represent weighted estimates from the China Chronic Disease and Nutrition Survey 2015 (n=189 306) and 2018 (n=184 475). Populations for the years 2015–16 and 2018–19 were standardised with the 2010 population census to gain comparable estimates. Error bars show 95% CIs. The unweighted denominators were much greater than 50 for all subgroups apart from current female smokers aged 18–29 years; in this subgroup, the unweighted denominator was 61 in 2015–16 and 50 in 2018–19, and these results should be interpreted with caution. Among the total population, awareness of e-cigarettes significantly increased in 2018–19 compared with 2015–16 (p<0·0001). p values are shown in appendix 2 (p 12).

Figure 2: Prevalence of past 30-day e-cigarette use in urban and rural areas in China by education level (A) and annual household income (B) in 2015–16 and 2018–19
Figure 2: Prevalence of past 30-day e-cigarette use in urban and rural areas in China by education level (A) and annual household income (B) in 2015–16 and 2018–19

Data represent weighted estimates from the China Chronic Disease and Nutrition Survey 2015 (n=189 306) and 2018 (n=184 475). Populations for the years 2015–16 and 2018–19 were standardised with the 2010 population census to gain comparable estimates. Error bars show 95% CIs. p values are shown in appendix 2 (p 13).

Research shows that China and other countries have similar e-cigarette use patterns. 1. Similar to other countries, e-cigarettes are also popular among Chinese teenagers and young adults. 2. The vast majority of e-cigarette users are smoking traditional cigarettes. In 2018-19, 96.2% of Chinese e-cigarette users are now smoking traditional cigarettes. 3. People who have never smoked traditional cigarettes rarely use electronic cigarettes, but never smokers who are aware of the harm of traditional tobacco are more likely to use electronic cigarettes. Fourth, obese people are more likely to use electronic cigarettes.

Importantly, the study paid special attention to the use of e-cigarettes among young people aged 18 to 29 in China. The use rate of e-cigarettes among young adults aged 18-29 in China has increased significantly from 2.0% in 2015-16 to 2.7% in 2018-19. Due to the harm of nicotine to the brain development of young adults, the US CDC advises young adults not to use e-cigarettes or vaporized products (containing nicotine or THC). However, China’s current regulation on the sales and promotion of e-cigarettes only targets young people under the age of 18. In addition, given that the smoking rate among young Chinese women continues to rise, and the impact of e-cigarettes on fetal brain development is still unclear, the researchers recommend that public health policy makers increase investment in this area and formulate prevention and control plans.

There is still controversy about whether e-cigarettes can be used by smokers to quit smoking. This research shows that the regulatory policies for e-cigarettes may affect the health of up to 16.9 million Chinese. We encourage those who want to quit smoking to the smoking cessation clinic for personalized advice, call on the public health community to pay attention to the short-term and long-term health effects of e-cigarette use, and continue to monitor and regulate it, and develop differentiated e-cigarette policies for different groups of people And public education strategies to deal with the new challenges that e-cigarettes bring to tobacco control.

Analysis on more possibility of e-cigarette commercialization in China

Whether to make electronic atomization hardware or to make tobacco may be a “multiple choice” problem faced by electronic cigarette brands.

On the one hand, cooperating with China traditional tobacco companies and exploring new cooperation models is the only way to further expand the penetration rate of the e-cigarette market. With the help of sales channel power, brand power, and user community power, brands will be able to explore new growth space for e-cigarettes. However, compared with the size of the giant traditional tobacco companies, this kind of cooperation is also full of dangers, and the slightest carelessness may be fatal.

On the other hand, it is transforming into health electronic atomization hardware products, cutting into the big health track. For patients with respiratory diseases and patients with pharyngitis, nebulized drugs have better therapeutic effects. In China, products such as throat moisturizers also have a larger market space.

In fact, in the direction of electronic atomization products, some companies have begun to make relevant arrangements. In September of this year, RELX announced that it has recently opened a life science laboratory, which will systematically study the harm reduction degree of electronic atomized aerosol at the human cell and animal level, and carry out preclinical safety assessment.

The actions of RELX may find another way out for the e-cigarette industry. Based on technology research and development, the transformation of technology companies in the health field may be a “sunshine road” for the development of the industry.

In addition to the transformation and expansion of health technology companies, there may be another commercial possibility, that is, to be a traffic distribution platform.

In fact, for a considerable number of smokers, they have more or less the idea of ​​quitting, and a considerable number of users who purchase e-cigarette products hope to get rid of their dependence on traditional cigarettes, behind which is the general trend of tobacco control. Under the circumstances, more and more people are beginning to realize the harm of cigarettes.

For e-cigarette brands, these users are actually a traffic pool with extremely high traffic value.

On the one hand, from the perspective of the underlying logic of Internet commerce, the most essential thing in the Internet economy is the commercialization of traffic, and traffic attributes determine the height of value realization. From the perspective of traffic attributes, e-cigarette uses are a group with high health risks, which is a rare accurate traffic for the health industry, and the value of traffic related to medical attributes has always been high, such as medical beauty.

On the other hand, from the perspective of traffic coverage, public data shows that China smokers have reached 350 million, the public domain traffic pool is large enough, and these traffic is the traffic that has been educated by the market. The more mature the traffic is, the more easy to realize making money, the value is greater.

However, whether e-cigarette companies can distribute traffic depends on whether they can aggregate product traffic into online traffic and find a suitable way to activate the value of these traffic.

In fact, the model of “making friends with hardware and making profits from traffic” has been proven in other smart hardware fields. However, as a hardware product, the biggest difference between e-cigarettes and other hardware products is the lack of effective interaction. When content is used as a channel for attracting traffic and monetizing, how to bring offline traffic to online and further activate the value of traffic is the key.

Judging from the existing precedents, the model of converging traffic online through products has been verified. For example, the American fitness giant Peloton obtains a traffic pool through hardware sales, and then realizes it through online lessons. As for how e-cigarette brands can gather traffic and find suitable monetization methods, further exploration is needed.

From the perspective of valuation, the valuation of an Internet platform company will be much higher than that of a hardware company that does electronic cigarette products. Take Xiaomi, for example. Lei Jun’s positioning of Xiaomi is not only a hardware company, but an Internet ecological company similar to Meituan.

The China e-cigarette industry chain has been very complete. The capital market’s optimism with e-cigarette companies for the expectation of penetration and growth in the traditional tobacco market, which is essentially the logic of “hardware business model valuation”, while the Internet ecosystems such as Xiaomi and Meituan. the valuation of these technology companies generally adopts “value investment logic”, and it’s more about future growth.

In fact, compared to simply making e-cigarette products, e-cigarette companies most need technical and commercial derivation capabilities. The stronger the derivation capabilities, the higher the value ceiling of the company. Therefore, for e-cigarette companies, after the regulatory policies gradually become clear, how to derive more commercial possibilities based on hardware products may be the best choice for future corporate growth in the cold winter of the industry.

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

According to the data from the enterprise search, there are currently 23,100 electronic cigarette-related enterprises in China. Guangdong Province has the largest number of related companies, with a total of 8,344, of which 6,580 are in Shenzhen, accounting for 28.5% of the country’s total. In 2020, the number of e-cigarette-related company registrations has risen sharply. In the first three quarters of this year, the number of registrations reached 7,372, a year-on-year increase of 167%. At the same time, in 2019, the e-cigarette industry risk information reached 179, a year-on-year increase of 39%.

China e-cigarettte company registrations increased by 167% year-on-year in the first three quarters
Guangdong province in China has the most vape companies.

Shenzhen owns 28.5% of China vape enterprises

Judging from the distribution of provinces, according to the data of enterprise search, the number of related enterprises in Guangdong, Jiangsu and Zhejiang ranks top 3. Among them, Guangdong Province is far ahead with 8,344, Jiangsu and Zhejiang are ranked second and third with 2,329 and 2,146 respectively.

Judging from the ranking of cities, the data of enterprise search shows that Shenzhen has a large number of vape related enterprises, with 6,580 in total, accounting for 28.5% of the national total. Hangzhou ranked second with 772 companies, while Dongguan and Xi’an ranked third and fourth. In addition, the two municipalities directly under the Central Government, Chongqing and Tianjin, were shortlisted in the top ten.

According to the company’s data, in the ten years since 2010, up to 2018, the registration volume of e-cigarette-related companies has grown slowly. The industry achieved substantial growth in 2019, with 4,129 registered companies that year, a year-on-year increase of 132%. As of 2020, a total of 10,175 related companies have been registered, which has exceeded the number of registrations for the entire year of 2019. Under strong regulation, the development of e-cigarettes is still accelerating.

In the first three quarters of this year, a total of 7,372 e-cigarette-related companies were registered nationwide, a year-on-year increase of 167%, of which 4387 were newly registered in the third quarter, a year-on-year increase of 244% and a month-on-month increase of 95%.

China e-cigarettte company registrations increased by 167% year-on-year in the first three quarters
Shenzhen ranks first with largest vape company number

The number of industry risks in 2019 increased by 39% year-on-year

From the perspective of the number of risks, company check data shows that there are 501 related risks in the e-cigarette industry. The number of risks that occurred in 2019 was the highest in the past five years, reaching 179, a year-on-year increase of 39%.

From the perspective of registered capital, the company’s data shows that more e-cigarette-related companies are distributed within 1 million yuan, accounting for about 61%, and most of them are concentrated in the wholesale and retail industries. About 29% of the registered capital is between 1 million yuan and 5 million yuan.

China e-cigarettte company registrations increased by 167% year-on-year in the first three quarters
Vape company risks keep rising year on year