Chinese e-cigarette brands’ international vision-opportunities and challenges

According to statistics, there are currently more than 1 billion smokers in the world, China accounts for nearly one-third, and the penetration rate of electronic cigarettes in China is less than 5%. For many e-cigarette companies, see great potential in the Chinese market.

However, due to factors such as policy, user education, market cultivation, and smoking costs, the current Chinese market is far less than the expectation. E-cigarette products or brands must go export if they want to survive.

First of all, although the Chinese e-cigarette market has huge business opportunities and is known as the billion-dollar blue ocean market. which is one of the most important motivations for many e-cigarette brands to enter the industry in the first place. But at this stage, there are several problems in the industry:

1. The e-cigarette national standard will be introduced soon, and the policy will inevitably affect the Chinese e-cigarette market;

2. Consumers in Europe and the United States are generally more aware of health and harm reduction and are more willing to accept new tobacco products. The cost of smoking overseas is much higher than in China;

3. For e-cigarette brands, the growth rate of domestic channels is slow compared with the matured market, thus it requires a lot of resources in channel erection and user education, which is hard to be excepted and takes a long time.

4. Cultural differences between China and foreign countries.

The above points have determined that the true blue ocean of e-cigarettes is overseas, especially for those expanding e-cigarette brands that are favored by capital. In order to improve the overall market valuation of the brand and avoid the slowdown of brand growth, export not only brings a new wave of performance growth to the brand, which also helps the brand to globalization and diversifies regulatory risks.

But the problem is that there are even bigger challenges behind the opportunity. The Chinese “sea” looks blue, but it is not broad, while the foreign “sea” is wide but full of unknown…

According to the 2017 World Tobacco Development Report, the global e-cigarette market has reached US$12 billion, of which overseas markets account for 94%. Another data also shows that the global e-cigarette market reached 20 billion U.S. dollars in 2018, and the global e-cigarette scale is expected to reach more than 30 billion U.S. dollars this year. Assuming that the overseas share in 2018 is still converted by 94%, the Chinese market will only account for 1.2 billion.

Juul limited to nicotine content and consumer habits

For example, Juul Labs, the world’s number one e-cigarette brand, has already occupied more than 70% of the e-cigarette market in the United States before it was acquired by the Altria Group, including supermarket chains, e-cigarette stores, and convenience stores. Even the gas station can almost see it.

However, with the FDA’s tightening regulation of e-cigarette products and the Altria Group’s acquisition of a 35% stake in Juul for US$12.8 billion, Juul, the original market leader in the US, had to start thinking about policy risks and corporate development. The problem is to place the product in overseas markets.

According to media reports, Juul is currently focusing on the marketing and expansion of overseas markets due to the consideration of corporate development. In addition to being listed in the US, Germany, France, the United Kingdom, Switzerland, Canada, Russia, and Israel, Juul also entered the Korean market and the Philippines market in the middle of this year. The company also announced that it plans to enter the GCC Countries, Indonesia, and Ukraine markets.

Note: GCC Countries include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).

It is worth noting that Juul’s rapid development in the United States is partly due to the high substitution of nicotine salts for cigarette products. The United States allows e-cigarette companies to sell cartridges with a nicotine content of no more than 5%.

However, all EU member states, including the UK, and South Korea, which has just begun to develop a small vaping market, stipulate that the nicotine content of the product should not exceed 2%, which greatly reduces Juul’s market competitiveness. In addition, Juul’s overseas channels mostly adopt a cooperative model. Even if it can reduce the resources spent on the market, without the full control, and it is easy to derive other uncontrollable situations.

On the other hand, consumer habits caused by cultural differences have also become a major challenge for Juul to promote in other countries.

Just like Germany, although nicotine content is an important reason for the direction of product development, compared to other EU regions, German consumers seem to be more inclined to use traditional large vaping devices. At the recent Hall of Vape in Stuttgart, Germany, most of the products on display were still in large vaping products, 510 atomizers and nicotine vape oil, while the interchangeable cartridge and HnB devices were very rare, and users did not care much about small vaping products.

Not only that, but the entire EU region, South Korea, Japan, and Southeast Asia, all have their own Vaper culture, and the people have different tastes, so even the e-cigarette leading brand can not rely on brand awareness to get explosive growth in these markets.

Multiculturalism, brand recognition becomes the main problems

A few days ago, media had reported on the “Relx”, its CEO Wang Ying pointed out the difficulties and challenges faced by the brand at the “2019WISE Super Evolution” conference.

Wang Ying said that in overseas operations, the greater challenges faced by Relx are the same as those of other companies, such as laws and regulations, regulatory environment, economic environment, media, and public opinions. “When we are eager to go international, we naturally don’t understand what it is, we are not familiar with the politics, economy, regulations, government, change, of course, public attitude, economic environment, economic fluctuations of different countries.

“In China, it is normal for everyone to send their elders a cigarette for the holidays. This is not the case in the United States. In the United States, young people feel that smoking is not their business and should not be done. It is indeed a social cognition in the United States. Only people with relatively low levels of education and relatively low economic income will smoke, which is a completely different social environment and cognition.”

Wang stressed that many Chinese marketing methods or product content may not be applicable in many overseas markets. “When we say that branding is also the export of cultural values, for example, our lychee ice feels delicious, but a Canadian customer said that this lychee has never been seen before.”

In addition to the diversity of differences, the data proposed by Wang Ying points out the issue of consumer acceptance of products. The data report shows that although the trust and recognition of overseas consumers to Chinese brands is increasing year by year, from 26% in 2016 to 54% in 2018, the report also pointed out that US, Japanese and German companies are overseas accounts for 80%.

This means that the recognition of “Made in China” in the consumer market of other countries will greatly help Chinese e-cigarette brands entering overseas markets. At the same time, this also means that Chinese brands must compete with other countries with higher recognition. This is like buying electricity from Japan, buying cosmetics from South Korea, for the same reason, the recognition of the origin of products, will affect the market penetration of the product.

In general, globalization, which may be an infinite business opportunity in the eyes of many companies or a good strategy to avoid policy regulatory risks. However, in the context of tobacco companies actively developing new types of tobacco and investing large sums of money in the overseas market, it is like a “gamble” rather than a “challenge”

Because going to the international market not only has to adapt to different regulatory policies, but also to solve cultural differences, the environment, adolescent addiction, and other issues. If you make a mistake or make unbalanced resources, it is very likely that the company will end in failure.

Therefore, before fully understanding the policies, economy, culture, and technology of overseas markets, e-cigarette companies can carefully study domestic and overseas markets in addition to improving their product technology and quality control in the domestic market. The difference is to accurately position the brand strategy and lay the foundation for the future global market.

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Asun
Asun@Vapebiz.net
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