Companies hurry to cash in on the E-cigarette boom in China

" These more than 1,500 brands have an urgent problem to face – a market with a size of only billions in 2018, able to absorb so many new brands? Challenges and opportunities in the e-cigarette industry. "

These more than 1,500 brands have an urgent problem to face – a market with a market size of only billions in 2018, able to undertake so many new brands?

Even though it was criticized at the CCTV 3.15 party, the e-cigarette heat remained. On April 14, IECIE, the largest e-cigarette exhibition in China, opened for three days. According to the statistics of the organizers, more than 70,000 people participated in the exhibition, which is 16,000 more than last year.

Since the second half of last year, the attention of capital markets and entrepreneurs to small-smoke e-cigarettes has risen steadily – easy to operate, high repurchase rate of oil cartridges, and directed to younger user groups and upgraded consumer markets, which are considered to have potential to gain its own place in the tobacco market. More importantly, Shenzhen has the most mature and sufficient e-cigarette production capacity in the world, greatly reducing the barrier to entry, and also let the KOLs with numerous traffics see a valuable opportunity to cash in on the market.

People thought that the 3.15 party would somewhat calm the heat of e-cigarettes: CCTV reported that e-cigarettes also release harmful substances, which harms the health of smokers and passive smokers just as traditional tobaccos. Long-term use of e-cigarettes also produces dependence on nicotine. At the same time, many product labels are not standardized, or the nicotine content exceeds the standard, vaporized propylene glycol and glycerol have a strong stimulating effect on the respiratory system. However, the specific brand name was not mentioned in the report and no explicit exposure was made.

From the situation of this exhibition, such supervision is making the electronic cigarette manufacturers more cautious. For example, they claim that their product does not convert new smokers, but provide a healthier choice for the old smokers; in addition, they also say that they will never open sales to underage youths.

But on the other hand, these new brands are getting the attention of dealers and consumers as much as possible, and continue to expand their influence. At present, they have basically completed the first stage of development – ​​quickly launching products through marketing and using mature supply chains to create brand awareness; now, they are entering the second stage – where it is difficult to make revolutionary breakthroughs in products. The support of a more stable and mature channel network will enable them to enter the consumers on a large scale and continue to promote this business.

This market, which was only a few billion yuan last year, may be difficult to meet the growth requirements of the new brand. They are entering the battle field  of getting consumers: how to lower the price, logistic layout, and efficiently access traffic will be the key to this year’s victory.


Reducing Entry Barrier

At the show, the audience can clearly feel that small size closed disposable vape products has occupied the main stage. At the same time, the lower price and disposable vape products with lower entry barrier were concerned by the buyer.

However, the problem of imitation and plagiarism is still noticeable. Many products share similarities with the previous designs of brands such as JUUL, relx, and hawthorn. The uniqueness of the product and the protection of the design may need to be upgraded to a more important level in operation. Many brands rushed to launch their new product before the show, poised to introduce new products at the show and sell them to dealers and customers. For example, the Shanlaa Mix, the throwing atomized electronic cigarette, the fine salt technology introduced the lighter and cheaper EVOVE lite, and the independent brand jouz of Anke Technology introduced the flip-type electronic cigarette jouz S in Japan.

Flip-Top Design jouz S

The first obvious product trend is that many brands have introduced disposable vape to lower their entry barriers: consumers can try to experience them without having to invest about ¥200 to buy cigarette rods. At the same time, this may be more suitable to the needs of consumers for scenarios such as Internet cafes and KTVs.

At present, Shanlaan MIX invested by Inno Angel and IDG , the MOTI MOJO invested by ZhenFund, and the mini VPO of the VPO from a previous channel dealer, and the latest round of EVOVE’s disposable cigarette products invested by the Arena Capital. All set the price at ¥39, the different rod colors stand for different tastes.

Normally, the nicotine intake 10 puffs of vape equals to 1 puff of traditional cigarette, a disposable vape can draw 400 puffs, which is equal to the amount of two packs of cigarettes.

Apart from introducing its disposable vape, Shanlaan MIX also hopes to promote a new way of smoking: two small vape together, mix with different tastes. But this does not create too much appeal for many users, more like a way to promote sales.

More, many brands are continuing to lowering the price. For example, EVOVE has launched a new product line, EVOVE Lite, which is made of plastic with bright colors. The price is ¥199 per set, which is two-thirds of the previous generation, but the amount of oil in the adapted single cartridge is also reduced half.

The British brand AIRSCREAM, which just entered China and emphasizes popular fashion, although the products themselves are not very prominent, they lowered the price to ¥99 per set, including a tobacco rod, a cigarette and a charger. This may be related to the current state of the industry in the UK: under the subsidies of the tobacco group, sometimes the price of a vape rod can only cost &10 (about ¥90).

Some brands continue to explore how to establish uniqueness in the context of high levels of product homogeneity in the market. For example, jouz, because Anke Technology is mainly engaged in the production of consumer electronics, has a mature accumulation in the electronic product supply chain. As a result, they chose a one-piece stainless steel body that is thinner and more difficult to mass-produce, and features a flip-top design. However, due to the low yield of such a design, the current jouz S has not yet been officially put on the market, and the selling price has not yet been determined.


Opportunity to Breakthrough

Undoubtedly, according to the “new business intelligence,” companies that have chosen the mobile phone supply chain to build their products and put more money into it have indeed produced better-quality better-looking products – such as the new ROMIO of Wel light vape. Ceramic cigarette holder, jouz S almost seamless clamshell interface, and relx smooth magnetic reloadings. These companies have shown more ideas and enterprising spirits in terms of product standards, texture and use.

In the past, traditional e-cigarette supply chain companies still have doubts about developing e-cigarettes in China, and now they have shown enough appetite. For example, the lighter brand ZIPPO launched VAZO. ZEAL, with its products, needs to be refilled by customers also launched its own small vape products. The pattern of the small vape market has become more complicated.

However, in contrast to the above brands, they still have defects which may be challenging to overcome: one is brand awareness, and the other is product capability.

For the companies with internet and consumer electronics background, have particular advantages in the e-cigarette industry. But in terms of physical enterprises, in addition to their deficiencies, it is worthwhile to argue whether it is worth investing in doing this. Because, if they don’t establish a specific brand, they can still get very considerable profits through ODM and OEM business.

One example of deficiencies is, a company with ODM background has launched a new cigarette brand which varies more than a dozen products that do not have a clear functional distinction and design consistency. Also, it indicates that it accepts outsourcing business.

The other example is that the Boton Group, a tobacco vape oil company that had previously draw attention of the venture capital industry due to Luo Zhenyu’s visit, also introduced its own small vape brand ”Lentil”, and stressed their specially added “Pure natural plant extracts”, but still, it is hard to make a strong appeal to the market.

But they have first comer advantages that new brands are struggling to catch up: the channels and markets that have accumulated over the years. YOOZ, LINX, FLOW, and other brands that have just been disclosed to Luo Zhenyu’s investment, such as “yeld”, who are trying to convert users through online traffic and then distribute, have begun to try to access more offline channels and develop dealers. There is a leaflet on the brand called “JOKOO,” which even prints straightforwardly: “Teach you to invest ¥60,000 earn ¥300,000 yuan” to attract more dealers.

Of course, there are also some brands that directly use the show as an essential means of absorbing C-end users. For example, the MOTI will regularly launch activities in the fan base, encouraging users to go to the site to collect prizes and experience new products. Also, compared with the traditional advantage side, the new brand’s bargaining power and technical ability are not that strong. Vaporesso, IJOY, KangerTech, etc., and companies that directly master the production capacity of electronic cigarettes are still receiving market attention. Take Vapporreso as an example. It had a revenue of ¥3.445 billion last year and a non-profit of ¥772 million. At least three booths were rented this year to showcase its different brands, such as the atomizing core brand FEELM. Brands Vaporesso and Zero.

Relx uses the FEELM ceramic atomizing core from Vaporesso

An exhibitor tells New Business Trend (WeChat ID: new businesstrend), although there are more than 1,500 brands in the market, 30%-40% of them are using FEEL atomizing core developed by Vaporesso.

After seeing more new brands in the exhibition, our judgment on the market of the post-spring festival remains solid: supported by capital, in the case that Chinese smokers are still hard to be quickly converted, a war for dominance of the e-cigarette industry is inevitable. At the same time, brands that have mastered more advanced tools and productivity may knock out their competitors faster than we think.

While companies are still cautious about the current situation: a vape oil company from the exhibitions said that although they are running in full capacity, but yet, they have not received more new orders, “that’s it”

Moreover, a more significant risk is that although Shenzhen gave initial supervision instructions, two places facing Shenzhen across the waters began to impose more strict restrictions on e-cigarette, which may provide reference to future supervision policy for government.

Macao’s newly revised “Tobacco Control Law” came into effect on New Year’s Day this year. The new version of the Tobacco Control Law forbids both the sale and advertising of e-cigarette. The Hong Kong Government officially submitted to the Legislative Council on February 20, “2019 Smoking ( The Public Health (Amendment) Bill proposes to ban the import, manufacture, sale, distribution, and promotion of electronic cigarettes or heated cigarettes. Upon conviction, it will be fined HK$50,000 and imprisoned for six months.

IECIE may have fully proved that the Chinese market’s potential, but whether this industry can grow to hundreds of billions or even billions as expected, a lot of uncertainty remained. Therefore, to maintain their growth rate and expand their living space, even with a specific risk of public opinion, these new e-cigarette brands will be more active to become a famous brand.

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