Thursday, May 30, 2024

FLOW builds its own factory for electronic cigarettes


It was reported on 29th July that FLOW, the online influencer/ celebrity vape brand, had built its own factory reaching up to the supply chain and has started trial production.

This is also the first self-built supply chain for new brands in the industry in China, which means that consumer brands begin to penetrate upstream to occupy the initiative of R&D and production.

FLOW was founded by former Smartisan 0001 employee Zhu Xiaomu in January 2019. It appeared at a press conference of Smartisan on January 15.

It is reported that FLOW self-built factory has started production, but at the same time, it also works with other OEM factories. Two production model work together.

flow factoryThis is a new thing.

Most brands in the vape industry adopt the OEM model. The team with design ability will design separately and then make it produced in the supply chain. If they have no design ability, they will choose the public mold of the supply chain to produce, and then tag their own brand.

This also gives rise to the view that the entry threshold of vapeo industry is low and the ability of product innovation and R&D is insufficient. Although 30 vape brands have been financed since 2019, the low entry threshold is still criticized by the outside world.

FLOW wants to break the manufacturing mode of most electronic cigarette brands. It has built an electronic cigarette factory of more than 10,000 square meters in Shenzhen, becoming the first electronic cigarette brand with its own factory among the new brands.

FLOW announced in May that it had completed the investment of US$10 million led by MatrixPartners China. It belongs to the first round of relatively large-scale start-up brand with a certain financial strength, but it is not known whether it is strong enough to build its own factory alone.

There may be several possibilities, one is that the first round of financing and new financing of FLOW may not be fully disclosed, the current exposure of the MatrixPartners’s $10 million is likely to be only part of it, and the other is that FLOW has adopted the acquisition mode for the self-built factory , which is not yet confirmed.

FLOW’s investment institutions include a well-known US dollar investment institution in addition to MatrixPartners, but the official statement has not yet been made.

flow factory

Building a supply chain requires money, talent and strong ability to integrate the whole industry chain. It is a huge test whether the newly established online celebrity brand FLOW can not only focus on production and research, but also on brand and sales channel.

Once the FLOW model is established, the traditional electronic cigarette supply chain will be threatened with a wave of mergers and acquisitions. With the development of the industry, the weaknesses of consumer brands are exposed, such as uncontrollable quality, limited production capacity, long iteration cycle of products and serious leakage. In these key links, the brand has little control, which may restrict the development of the brand in the long run.

From the second point of view, the national standard of electronic cigarettes and the legislative supervision of electronic cigarettes are getting closer and closer, and the industry will eventually usher in supervision. The introduction of the national standard means that the cost of compliance will increase. Instead of being led by the supply chain at that time, it is better to start trying to build a self-built supply chain.

Beginning with the brand of celebrity, strengthening R&D and supply chain, and finally survive in the battle of sales channels.

flow factory

This is probably FLOW’s future development plan.

It’s a complete plan with brand voice and industry chain control. If the self-built factory is successful, then the production capacity will not be constrained by the technical level and production capacity of the agent factory, and the product update iteration cycle will also be shortened.

That’s a good thing.

On the other hand, FLOW may need to consider whether the timing, financial strength and talent reserve are adequate.

In addition, the involvement of consumer brands in the supply chain means that brands need to diversify their efforts from studying only consumers to studying both consumers and supply chains, which is also a challenge.

Anyway, FLOW’s attempt deserves some praise. Whether it’s a pit or a blessing, FLOW’s not only exploring for itself, but also helping the industry.

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