TAKI vape new product conference is held on May 21, 2019, , which attracted much attention and expectation from the industry, was held solemnly in the conference hall of Shenzhen Boton Group. Unexpectedly, the outcome of the conference was controversial. Some people think that Taki’s new product listing is full of all kinds of routines. Others accuse TAKI’s 1 yuan strategy of disrupting the whole industry market. Others even say that TAKI took the lead in the industry price war.
Following is the full text of TAKI’s new product launch speech, which is divided into three parts.
Konjac Zhong Yufei:
Special thanks to 105 media friends from all over the country, because I told them in the past few weeks that I was going to open a new electronic cigarette launch conference. They told me, “About electronic cigarettes, you can’t come, you can’t report, or you’re going to be killed!” So today I am especially grateful to you for risking your lives to come here! (Applause)
I think there are different voices on electronic cigarettes, but today I want you to witness together, what is electronic cigarettes really, because today many colleagues also come, thank you!
Nine years ago today, I joined Xiaomi, followed Lei Jun, Alee, Hai Daren and so on, and Since the transfer from Jinshan to Xiaomi. By coincidence, my employee number is 21, so today’s a special day – May 21.
Joining Xiaomi is a turning point in my life. It not only enhances my information acquisition ability, but also makes me see many different people. My social influence has soared up. With the company’s listing, my personal wealth has grown, and it also makes my family have a stable life. There is a saying that sometimes choosing to do things with the right one is more important than trying hard. This is the case. Here, I would like to thank Mr. Lei, Mr. Alee, Mr. Hai and former colleagues of Xiaomi in particular. I still miss the years when I fought with you in several houses. Here, I share a story with you. One day in March 2010, Alee and Haidao asked me to have tea in a teahouse. As soon as they sat down, they said to me, “Fei, Lei wants to work on a cell phone business. Would you like to work with him?” I looked into their eyes and hesitated for a moment. Without much hesitation, I answered 2 words: I do. (Laughter)
I especially felt like getting married. From that moment on, Xiaomi was all I had. I don’t know how many people have a deep impression on this sentence (deep meeting). After joining Xiaomi, it is basically the month of 996, year of 996. But everyone is very happy. At that time, more than 100 people, everyone is happy from their hearts. Everyone feels that they are contributing their strength to the progress of the whole mobile phone industry. That is the belief at that time.
# I think the electronic cigarette industry has been misunderstood too deeply.
Why do you say that? At that time, my income in Jinshan was very high, but after I joined Xiaomi, in 2010, my salary was 6,000 yuan a month, then there was mortgage and car loans, and the life of a family, the pressure was enormous, and there was little left after tax deduction. But everyone has a belief that the mobile phone industry has a broad space for development. Based on this idea, many people joined Xiaomi, and I am one of them. Today I do the same thing as nine years ago. I think the electronic cigarette industry has been misunderstood too deeply. I hope to have the opportunity to do something for this industry. This is the most original motivation for me to do this. (Applause)
At the same time, I will show you a new business model in the PPT penultimate page.
# I think a healthy lifestyle is very important.
In Xiaomi, although we work a 996 style for the year, but my family life is OK, my health is great, you can see the picture of me 15 years ago, then I can still see, see now I also keep good, you know why? The main reason is that I have developed a healthy lifestyle. So I think a healthy lifestyle is very important. Today, when you come here, you all know that we are going to launch an electronic cigarette product. In fact, my friends and my family will ask me the same question: Why do we make an electronic cigarette?
This question is actually not easy to answer. I spent a month preparing a PPT. Today I tell you why I want to make electronic cigarettes. Before answering this question, let me take a look at the data. There are three categories of tobacco products on the market, the first is traditional cigarettes, the second is low-temperature heating cigarettes, and the third is vapes.
# Two evils should be weighed equally.
Next, let me share a few points. First, IQOS is not a vape. There is only one criterion for judging whether a vape is a vape. That is, whether the content of the smoke is the same as that of traditional cigarettes. If it is the same, it is a traditional cagarette, but it is a transitional product. Secondly, whether it is traditional cigarettes, low temperature heating cigarettes or electronic cigarettes, they all are harmful. If people do not smoke, they must stop vaping. Third, if you have friends smoking, why do I suggest that you vape? I’ll talk about one of the dimensions, the degree of freedom, the degree of freedom of electronic cigarettes is very convenient. Many people who vape like to vape violently (simulate the action of violently smoking). If you smoke like this, the harm to your body is very great. Electronic cigarettes are different. When you like electronic cigarettes, you can take a sip, put it next to you after smoking, gracefully put it next to you without fear of fire. Therefore, the harm of electronic cigarette will be less if the two harms are less.
Second, global sales of e-cigarettes are only 110 billion yuan, far from being the kind of profitable product you might imagine.
# China will not oppose the development of electronic cigarettes
Third, there are nearly 26,000 patents of electronic cigarettes in the world, of which 23,000 are in China. What does this mean? What happened recently in Huawei, we know that specialty has a great impact on an enterprise and an industry. So someone asked me a question: Will electronic cigarettes be banned in China? I can say responsibly that 87% of electronic cigarette patents are in China. This is not a simple appearance patents, but mostly invention patents. These patents are in our own hands. Therefore, electronic cigarette is controlled by China, and its production base is also in China. I don’t know about the development of this industry, but China must support it. There is such a company in China, which ranks first in the world in the number of individual patents. Patents account for 43.8% of the total number of patents in the world. This is our strategic partner: Boton Group. Here I thank Boton Group in particular. Hello to Liu !
Looking at another set of data, the ranking of e-cigarette sales in the world is the largest in the United States and Britain. Sales in China are relatively small, with only about 4 billion yuan, which is worse than a restaurant.
# IQOS is just a transitional product
So do you think the spring of electronic cigarettes is coming? The penetration rate of electronic cigarettes reached 13% in 2018 and the latest figure this year was 15%. China has 350 million smokers, but the penetration rate of electronic cigarettes is less than 1%, or 3% to be exact. Why is the penetration of electronic cigarettes poor in China? I read some data from Tianmao, Jingdong and Taobao. There are still many negative comments on electronic cigarettes. There are three main aspects: e-liquids leakage, bad taste and unsafe.
The core problem is bad taste. This is also the reason why electronic cigarettes are not acceptable. IQOS sells so well because it’s cigarettes, but IQOS sells illegally in China. Current electronic cigarettes do not meet everyone’s needs, but I think IQOS is just a transitional product, just like digital cameras a few years ago, because IQOS is too big and inconvenient. Why does IQOS still sell so well? That’s because the vapes are not ready now. They are not really good. So we all work together to do this thing, I’m to make a really satisfying electronic cigarette to meet the real needs of the future.
Our product name is TAKI, like the joy, surprise, festive joy, our motherland’s culture is all-embracing but with restrain. The core theme of TAKI is “the more you like, the more restrained you are”. There are many friends around me who like smoking, like it, but I must restrain, for myself, for my family, to restrain. I read an article some time ago. I think it’s well written. There’s a passage like this:
“No matter it is the marketing of electronic cigarettes or the popularization of scientific knowledge, the only group that should be targeted is the existing cigarette smokers. To excavate new smokers in the name of “substitute cigarettes” and increment them with the idea of the stock is not too restrained for the market of electronic cigarettes. Electronic cigarette should be a functional product, not a fashionable and trendy product.
—— Locke Tiehang, founder of Pingwest Pingyao
# You smoke our cigarettes, just like real cigarettes – or almost
This passage fits the theme of Taki very well. What kind of product does Taki want to make? Hick to be a restrained brand, whether product or packaging, in all aspects, we have to restrain, we have to do a product that is helpful to the existing. For this reason, we have invested a lot of financial and material resources, and attracted a large number of talents. For this reason, what functions should our cigarette achieve? This is the focus of this conference – we want to make a tobacco-based electronic cigarette, you smoke our cigarette, just like smoking real cigarettes – or almost. (Laughter, applause)
No absolute tobacco flavor. How do we achieve this reduction of tobacco flavor? In fact, there are two aspects, one is hardware, and the other is software.
Hardware is vape device and pod. Our pod, I think it is a work of art, the design is very simple. At present, there are two kinds of atomization cores on the market, one is ceramics, the other is natural cotton, both of which have their advantages and disadvantages. The vapor of the ceramic atomizing core produce bigger vapor and the flavor is more delicate. But there are also some improvements in the ceramic atomizing core. The working temperature of the ceramic atomizing core is very high. High temperature will lead to more harmful substances. For example, why low temperature non-combustion is safer than traditional cigarettes, because the combustion temperature of traditional cigarettes can reach 800 degrees. At the same time, ceramics core also have some potential safety hazards.
# Windmill Separation Technology
So we chose the natural cotton atomizing core. Everyone knows the disadvantage of the natural cotton atomizing core. That is, the atomizing vapor particles are loose. How can we solve this problem? This technology is called windmill separation technology. Through windmill separation technology, large molecules are blocked off and small molecules enter your mouth and nose. The vapor is very comfortable. How to explain the windmill separation technology? (At the same time, a video of a farmer’s screen fan was showed, laughing and applauding.)
This technology solves a big problem with a low cost really. E-liquid flavor is really delicate. By this way, we have solved a problem of bad vaping taste that is not like having a big mouthful of sand in a dust storm in Beijing. It is not enough to solve the problem of vaping well. We also need to solve the problem of vaping good, that is, comfort, to be close to the feeling of real cigarette. This is the software part. Vape juice is the core part of the whole electronic cigarette. Before making electronic cigarettes, I had a misunderstanding about the electronic cigarette industry: it was vary simple. It’s hard to do this well until you really do it. It’s like a cook can only make good dishes with good skills. Another reason is that people’s subjective judgment of electronic cigarettes is too strong, and everyone’s judgment is different. Unlike mobile phones, all parameters can be compared, and can be calculated, electronic cigarettes do not have this comparison. Next, let’s see how our vape juice is made.
Now with warm applause, let’s welcome Dr. Zhang in the video.
# It might be appropriate to call me a doctor.
First of all, I am not a doctor, because I often hang out with doctors, so everyone calls me a doctor, in fact, it may be more appropriate to call me a after-doctoral, because I often follow after the doctor. (Laughter) Actually, I am a flavor engineer, a professional cigarette flavorist and flavor adjuster. To be more precise, I am a professional tobacco technical worker. After graduating from university in 2000, I entered the tobacco factory. Then I have been engaged in the design of cigarette products, formula design and cigarette flavoring. Now I have been in this industry for 19 years.
My understanding of electronic cigarettes is due to the Department in charge of electronic cigarettes. My caring about electronic cigarettes is due to the popularity of IQOS in the world. It has shocked the whole tobacco industry. But it is really related to electronic cigarettes, or because of Zhong of konjac technology. One day, Old Zhong asked me if I could develop a real electronic cigarette. I said that I vaped, which had bad smells and no one can be addicted to it. But Old Zhong told me that the electronic cigarettes we want to develop are to make the old smokers like electronic cigarettes. They have impact nicotine strength, most importantly, lower harm to health. In fact, his thoughts at that time deeply touched me. I think this idea is very creative. I once wanted to make such a cigarette in the past, because after so many years of tobacco, but for various reasons, I did not finish this thing. In the process of communicating with Lao Zhong, I thought he was a very affectionate person, so I agreed to his request.
After receiving the development task, I started to set up a team to investigage the vape juice verywhere, but tried hundreds of different flavors of electronic cigarettes, and could not find the taste of the real cigarette I was looking for. Sometimes I wondered if it was a false proposition that I was fooled by the Zhong to replace traditional cigarettes with electronic cigarettes. In retrospect, of course, I promised Zhong something to do, so I thought about the question: Why do people smoke? What are the group characteristics of these people who smoke? It is with such questions and doubts that why our old smokers do not vape that we constantly compare vapes with real cigarettes. Studies have found that smokers are addicted to nicotine, which reduces tar transfer and nicotine intake.
Our smokers like the aroma and characteristics of tobacco, but electronic cigarettes are all emphasizing the sense of throat hitting. We want to use the sense of throat hit to replace the aroma and satisfaction of cigarettes, to replace the comprehensive sense of enjoyment and pleasure of cigarettes. So I think that’s the real difference. With this foundation in mind, we use nicotine or nicotine salt to achieve the best satisfaction by increasing the aroma of the vape juice.
# What we want is fragrance and satisfaction, not one-sided throat beating.
Based on the original point of reducing tobacco flavor, we have done a lot of research, and finally made some significant breakthroughs in the aroma design. Our vape juice pays more attention to the aroma, and uses less nicotine or nicotine salt to achieve a reasonable and appropriate satisfaction. What we want is aroma and satisfaction, not one-sided throat strike. This time, two kinds of cartridges of TAKI No. 8 and No. 22 are designed with this idea. And the idea of replacing the feeling of hitting the throat with fragrance and satisfaction means that good cigarettes are smelled and fragrant in some degree. We feel the fragrance through the nose and the taste through the throat and mouth, rather than by a simple hit to the throat.
# Don’t overemphasize your throat
Here I solemnly appeal to our e-cigarette enterprises to stop over-emphasizing the sense of throat, which will mislead our customers. Throat feeling does not exist in our country’s cigarette smoking standards at all. It only keeps our e-cigarette companies producing higher nicotine or nicotine salt products to supply the market, leaving our consumers with no choice at all. At present, our vape juice market, 30 mg products are very few, some up to 40 mg, many in 50 mg, that is, 50 mg of high nicotine content products, our consumers still feel insufficient. I smoke four or five packs of cigarettes a day. I cough immediately when I smoke 50 mg of nicotine salt. I faint after 10 bites. I’ve never fainted before. This nicotine gets on my head too fast.
# The whole electronic cigarette market still has room to rise
Now there is room for the whole e-cigarette market to rise. The content of nicotine in Taki’s 8 and 22 grams is lower than the average level of the market, as low as 24 mg, but this is not our core goal. We will further strengthen the core technology research, and further lower the content of nicotine salt on the premise of ensuring appropriate satisfaction. It must be lower than our national standard. Our national standard is below 20 mg.
In the face of these products with high nicotine salt, I sometimes find it difficult to understand where the bottom gas comes from, saying that we can replace traditional cigarettes, there are many enterprises to induce customers through fruit flavor, or other fragrances we are all familiar with, so that non-smokers are addicted to smoking, so that smokers are more addicted, the more addicted they are to smoking, the more addicted they are to smoking, the more addicted they are to nicotine, and their dependence on nicotine is stronger and stronger. I think it’s irresponsible. I think we should stop emphasizing the sense of hitting the throat and pursuing high nicotine. This is also my solemn appeal to the society through this platform. We should pay more attention to the pleasant aroma, maintain appropriate satisfaction, not excessively obsessed with the sense of hitting the throat, and make our electronic cigarettes vape really good.
Konjac Zhong Yufei:
Dr. Zhang just mentioned 24 mg of nicotine, you may not have my own personal perception, we set the goal of 30 mg at that time, later Dr. Zhang said no, can we lower it, because the national standard is 20. I think no one can do 20 mg at this level. So we’re thinking, drop by drop, every time nicotine goes down a little, the taste will be worse. For example, in the same glass of water, some people put a spoonful of sugar to have sweetness, but some people put two spoonfuls is not enough, and add various spices to satisfy this feeling.
For the matter of 24 mg, we have invested tremendous human and material resources, and have gone a lot of wrong ways. We have two products, one is called No. 8 and the other is called No. 22. Dr. Zhang has repeatedly advised us not to make any comparison with a cigarette on the market, but I still made a video like this, which has huge policy risks. (Video comparison between sowing cigarette juice and a traditional cigarette)
This is our No. 8 and No. 22 (two mosaic pictures of traditional tobacco brands were released in PPT, and the whole audience laughed at each other). I think mosaic is a very useful tool. But I can say responsibly, we are not it, we will never reach his level, never make comparisons. It’s just a test we’ve done in their name.
In the next two months, we have a big product to launch. As you know, there are three kinds of tobacco bombs: tobacco, fruit food and flower fragrance. In order to meet your needs, we have restrained the introduction of these flavors: blueberry popcorn, mung bean smoothie, cold extract coffee, ice sweet litchi. To be honest, we are reluctant to introduce this kind of product. The nicotine salt content of this kind of product is very high, 50 mg. Because if the nicotine salt drops, the taste is very bad. Ice sweet litchi is recommended. It’s very refreshing.
There is also a small product, I dare not put it, this product will only face the sale of members in the future. This is a “honeysuckle”. This product has a special feature. If you have an uncomfortable nose, just take a gentle breath. It’s very comfortable, 0 nicotine.
# Both men wear condoms. They’re safe.
There is another big problem with electronic cigarettes: e-liquids leakage. How can we solve the pain of vape juice spill? A cost-effective method. First, two sets of structure, two people with sets, safe. Carry vape juice spill can be solved by this method. This is Lao Liu’s patent. The principle is very simple, the two ends are blocked, the air is not convective, and this problem is solved. It is normal vape leaking juice. If the vape does not leak juice, there must be some problems in this product. To accept the problem of vape juice leak, this problem has not been solved, but we can better avoid it.
# We can’t do 100% without vape juice leakage, but we can do 99% without vape juice leakage.
Secondly, in order to solve the problem of oil leakage during vaping, we have also come up with a solution: double blocking. First, the bottom block, the bottom with laser perforation, perforated six holes, these six holes are too thin, air can enter, vape juice is not out. Second, a top protective film is added to the top block. So on the issue of juice spill, we can’t do 100% without juice spill, but 99% without juice spill. If there’s a juice leakage, ask for me refund.
ONCE MORE THING.
# We solved the problem of interaction.
In fact, when you vape, you still have a feeling, it is not feeling. Like the early electric cars, you don’t know that there are many problems when you drive by. We solved this sense of interaction. How do we do that? (Video: Vaping sounds when vaping) This sound is very beautiful. I’m sure we have the voice and nobody else has it. Is sound comfortable? This is the sound feedback through the internal structure.
Besides, our mouthpieces are between 5 and 7 millimeters, beyond which we can’t bite anything. Our mouthpieces are made of baby pacifiers and can make you feel like your mother. The tobacco pole is treated by secondary anodization process, which is the same as the appearance of the apple notebook. We spent a lot of money on this process. It feels exactly the same as touching a girlfriend’s hand, no discount.
Besides, our products are very convenient. There are two kinds of cigarettes, traditional cigarettes or electronic cigarettes. Low temperature cigarettes are not the future direction, because they are too inconvenient. I think vapes have a good future. (Play product videos)
All the design and packaging of our products pursue two words: restraint. If you like it, don’t buy it. We won’t over-induce you to buy our products. But if you buy it, I believe that the more you look at our products, the more you like them, because you can’t pick out the faults. It’s really comfortable to hold them in your hands.
Let’s talk about the business model.
# Vape for 35 yuan
We have two cartridges, one is No. 8 and the other is No. 22. Thirty-five yuan each. (The scene was uproarious,’ expensive‘ someone said at the scene.) The price of one of our cigarettes is two packs of cigarettes. In fact, the price is not expensive, but I see no surprise, a little disappointed, I feel it. Everyone has a deep misunderstanding of the electronic cigarette industry. They all think that electronic cigarettes are profitable. But the main channel of sales of electronic cigarettes is offline, if the electronic cigarettes do not leave enough profit, this product can not be done. E-cigarettes are not as profitable as everyone imagines, but it should be emphasized that the main starting point is still profitable. There are so many investors sitting here. If everyone feels that there is no money to make, it is a very dangerous thing.
Other flavors are 30 yuan each. (So there was applause on the spot, and this technique worked well!) The prices of 30 and 35 are not expensive. One of the characteristics of electronic cigarettes is that they can stop and vape, unlike traditional cigarettes, each cigarette needs to be smoked out.
# The vape device sells for 1 yuan
The most important part is how much do we sell our vapes? I’ll separate the details from you. This vape stick is equipped with a charging line with magnets. It’s not cheap. Our cartridges and vape sticks are sold separately. As for this one-in-one atomizer set, how much do we actually sell? —— They asked me to stand in the middle and post the news (laughter) —1 yuan! (Cheers, highlights of the event)
Why sell at this price? There are many reasons. Because I am worried about people saying that we are expensive, I have talked with Liu of Burton. I think this product still hopes to make you a healthy lifestyle. This is really my original intention. I also thank Liu for our special support. Thank you!
We also have new products coming out soon. All our products will sell at this price in the future. This is our philosophy.
# Fully open source products
This product is totally open source, we will not set any threshold for this product, we will allow all people to choose other brands of cartridges. Jingdong will be on sale at four o’clock this afternoon.
# I’d like to share 10% of my stock with my city partners.
Tobacco is a product of a large part of the profits are circulated online, so I will recruit City partners in 100 cities across the country. Many people have talked about it. I hope we have a common idea with city partners. In fact, the profits of our products are not profitable, but it is no problem for city partners to make money. I believe perseverance can create better value. There are 350 million smokers in China, and the penetration rate of electronic cigarettes is less than 1%. This market is still very promising. To benefit the users around us is to create value for themselves. I would like to share our growth with 10% of our stock and city partners.
The 1 yuan price of the Taki vape is extremely low which is hated and criticized by many vape companies saying they are cutting off the profits of the vape industry just like Xiaomi did in the mobile phones.