Snowplus Enters JD and Tmall as China-US Vape Brands Face Off

In the electronic cigarette market, dubbed the "first windfall of 2019," a competition between Chinese and American companies has begun.

On September 9, JUUL from San Francisco launched on the two major e-commerce platforms in China, "JD" and "Tmall." Its debut product is the "Startup Kit" priced at 369 yuan, which includes four flavors. The core of its Chinese promotional slogan is "committed to improving the quality of life for 1 billion adult smokers," citing authoritative data to prove it is the best-selling e-cigarette in the U.S. Another unverified report claims that JUUL is expected to invest $100 million in marketing in China.

This American e-cigarette giant was founded in 2015 and captured 30% of the U.S. e-cigarette market within just three years. After completing a $12.8 billion financing round in December 2018, JUUL's valuation reached $38 billion. The public is also aware of the company's extravagance— in 2018, JUUL allocated $2 billion for year-end bonuses, with 1,500 recipients averaging $1.3 million each.

The news of "the wolf is coming" spread in July this year. A Chinese e-cigarette media outlet reported, "The strong dragon challenges, who dares to fight?" Leaders from 14 top Chinese e-cigarette companies, including Snowplus, RELX, and MOTI, expressed their views.

"JUUL's entry into China not only brings mature products but will also rapidly usher the industry into more intense and comprehensive competition." In the aforementioned report titled "14 E-Cigarette CEOs Discuss JUUL's Entry into China," Snowplus founder Wang Sa stated, "This will attract more talented individuals and capital, and will comprehensively enhance our companies in terms of products, channels, and brands."

Therefore, alongside JUUL's launch, Snowplus also introduced two new products—"Night Demon" and "Invisible Smoke"—on the same e-commerce platforms. Among them, "Night Demon" features a fluorescent design, targeting a trendy and cool image; while "Invisible Smoke" is more accurately described as a "non-intrusive" series. It completely eliminates visible smoke on a zero-tar basis, minimizing the impact of secondhand smoke.

"Being able to compete with the world's number one company represents the current state of China's e-cigarette industry development," commented a representative from the China Electronic Cigarette Industry Association. "In this industry, Snowplus is a representative of innovation and speed."

Official data from Snowplus indicates that after launching its products in April 2019, it sold 100,000 sets in the first month, surpassing 800,000 sets by July. The online sales from its JD flagship store have maintained a monthly growth rate of 200%. Although there is still a significant gap compared to JUUL's $1.1 billion sales in 2018, Snowplus's five product series and 14 flavor options have already surpassed this American brand.

"These products are crafted by us bit by bit. At the beginning of our startup, we said 'morning' to Shenzhen at 4 a.m. almost every day," Wang Sa said. Currently, all e-cigarette R&D and production bases are concentrated in the city recently designated as a "demonstration zone for socialism with Chinese characteristics," where e-cigarettes have become one of the three major hardware products alongside mobile phones and drones.

Unlike strong imported products like tobacco and coffee, the world's first e-cigarette was invented in China by renowned pharmacist Han Li in 2003. Its basic working principle is to generate heat powered by a battery to atomize e-liquid and produce vapor. Three years later, the "Ruyan," which applied Han Li's patent, successfully launched. Unfortunately, due to issues with promotion and operation, "Ruyan" was acquired by British American Tobacco, becoming the biggest regret in this industry.

However, due to its Chinese roots and the pursuit of capital, today, Chinese companies occupy 95% of the global e-cigarette production and over 90% of the export volume. Although the idea of replacing freebase nicotine in traditional e-liquids with nicotine salts originated from JUUL's two young founders, over 90% of global e-cigarette patents are owned by Chinese companies.

"It can be said that our e-cigarette industry has pricing power internationally," said Yao Jide, executive vice president of the Electronic Cigarette Association.

However, industry insiders generally believe that in the Chinese e-cigarette market, which lacks clear regulatory guidelines, competition between brands also includes understanding the upcoming policies. One of the main criticisms of JUUL in the U.S. market is its marketing to teenagers, even using teenage models in advertisements. When this product enters China, it has noticeably toned down its approach. On the official websites of "JD" and "Tmall," the statement "designed for adult smokers, not for sale to minors" is prominently displayed.

"We have competition in products, but the bottom line must be adhered to by the public," said Snowplus founder Wang Sa. On Snowplus's packaging, there has always been a warning against purchases by minors. The control of online sales flow is also the company's top concern.

An industry insider stated: Traditional tobacco has controlled sales channels through exclusive sales, but data on the purchasing subjects, smoking demographics, and frequency cannot be accurately grasped. Like many traditional enterprises, they cannot analyze user habits to achieve a more precise and efficient understanding of consumers. However, when electronic technology and internet technology intervene in atomizers, companies can gradually master the production, sales, and usage of e-cigarettes, and analyze the behavioral habits of their users. For example, through facial recognition technology in vending machines and statistics on vaping frequency, big data reports can be formed to achieve the goal of smoking control. This is what is meant by "technology changing social governance."

While countering JUUL on e-commerce platforms, Chinese e-cigarette brands, including Snowplus, have also begun their own overseas expansion. "From JUUL's global market layout, this company's ambition is significant. It has already opened markets in Germany, France, the UK, Switzerland, Canada, Russia, and Israel," Wang Sa said. "We believe that the e-cigarette battle is a global competition, so we are also starting to enter the North American and other international markets."

On August 27, Snowplus's advertisement appeared on the large screen at Nasdaq in the U.S., and two days later, it announced its overseas expansion plan, with the North American market being a key focus. The smoke of the e-cigarette battle has already begun to spread globally.

Appendix: Industry CommentaryJUULChina Pricing: A Little Trick!

Let's calculate the price of "one stick and six pods" based on the promotional price of the kit:

The device is priced at 299 yuan, and the pods are 37.25 yuan each. The normal price for "one stick and six pods" is 299 + 37.25 x 6, totaling 522.5 yuan.

The promotional price is 369 yuan, which seems like a good deal. Domestic e-cigarettes (like Snowplus—editor's note) offer "one stick and two pods" for 298 yuan, while JUUL offers "one stick and six pods" for 369 yuan.

However, considering that its pod capacity is 0.7ml, six pods total 4.2ml. Domestic e-cigarette pods generally range from 1.2ml to 1.5ml, meaning two pods total 3ml, costing about 70 yuan more, which is roughly enough to buy two domestic e-cigarette pods. If priced the same at 369 yuan, domestic e-cigarettes can purchase "one stick and four pods," assuming pod capacity is between 1.2ml and 1.5ml, totaling 4.8ml to 6ml, while JUUL can purchase "one stick and six pods," totaling 4.2ml. Thus, JUUL is actually playing a little trick with the number of pods.

However, JUUL might say: My brand premium is high!