Can the Vaping Industry Last Long Term?

Can the Vaping Industry Last Long Term? The vaping industry can last long term? The vapor produced by e-cigarettes is not smoke but vapor. With the addition of synthetic nicotine in the e-liquid, a single puff creates a throat hit, providing satisfaction for smokers. This is a gadget used by smokers to relieve their cravings, and e-cigarettes have matured significantly abroad.

Because they do not contain tar and do not pollute indoor air, e-cigarettes once became the best alternative to traditional cigarettes.

A Chinese pharmacist named Han Li invented the e-cigarette, branding it as "Like Smoke." However, this product faced many challenges in China, remaining on the fringes of health and regulation until it was taken off the market due to false advertising.

After disappearing, e-cigarettes blossomed in Europe and America, becoming extremely popular. In 2019, after a roundabout journey, e-cigarettes returned to the Chinese market and became a new darling of capital.

This new circle includes self-media personalities, Bitcoin mining machine manufacturers, former mobile industry executives, tech enthusiasts, and various big shots from different fields. They are all involved in e-cigarettes, believing that there are two main reasons to attract capital in this field:

1. People are naive; 2. There is a lot of money.

In January 2019, Canaan Creative held its annual meeting.

Canaan Creative is a digital currency mining machine manufacturer, and at this time last year, when Bitcoin was booming, Canaan Creative's brand was shining brightly.

But looking at the current state of Bitcoin and blockchain technology, you can see that the days of mining machine tycoons are also tough. Just a few days ago, it was said that Bitcoin needed to expand, but as the mining volume increased, the price of mining naturally dropped. Moreover, there are not many naive investors left in this field, so the mining machine business is not as good as before.

However, there were still gifts at the annual meeting. Some attendees shared pictures on social media: "No gifts for the New Year, just give out whale e-cigarettes"—referring to a product called "Wel Whale Light Smoke."

E-cigarette products appeared at the annual meeting of a blockchain company, which seems unrelated, but there are coincidences between these two seemingly unrelated things.

According to "Deep Chain Finance," the company behind Wel Whale Light Smoke is Hangzhou Whale Smoke Network Technology Co., Ltd. Tianyancha information shows that this company was registered on January 11, 2019, and has completed tens of millions in Pre-A financing, with the major shareholder and legal person being Kong Jianping.

Interestingly, the co-chairman of Canaan Creative is also named Kong Jianping. Reports indicate that the controlling team behind Wel Whale Light Smoke is indeed the executive team of Canaan Creative.

However, this claim was later denied by Canaan Creative's executives. "Wel Whale Light Smoke is invested by Canaan Creative's shareholders themselves and has nothing to do with Canaan Creative."

The former blockchain hardware tycoon venturing into the e-cigarette market sounds unreliable, regardless of its truth. The e-cigarette market is right there—data shows that from $416 million in 2010 to $7.1 billion in 2016, the e-cigarette market expanded 17 times in six years, with a compound annual growth rate of 60.5%.

However, the booming foreign market does not mean that the domestic market will follow suit. It is important to note that in 2016, the consumption scale of the e-cigarette market was only 3.2 billion yuan, while the total sales revenue of the cigarette industry in 2016 was 1.3706 trillion yuan. Currently, the Chinese e-cigarette market only accounts for 0.23% of the tobacco industry.

Just when this industry was about to cool down domestically, the market suddenly opened up.

Let's take a look at the well-known year-end bonus legend.

In July 2018, the American startup e-cigarette brand Juul was valued at $15 billion. It holds 68% of the U.S. e-cigarette market share, which has reached half of the valuation of Imperial Brands, a century-old tobacco company, making Juul the sixth most valuable startup in the U.S.

After Juul reached a $12.8 billion investment agreement with Marlboro cigarette manufacturer Altria Group, Juul's management decided to distribute a $2 billion year-end bonus. This special dividend was given to the company's 1,500 employees, averaging $1.3 million per person, equivalent to ten years' salary for a junior programmer in Silicon Valley.

Perhaps Juul's year-end bonus moved the capital. The booming e-cigarette market across the sea transmitted to this side, and in China, a brand new "old" market began to attract adventurers to invest in.

For example, Zhu Xiaomu, the former product director of Smartisan Technology, left to create Flow e-cigarettes. Naturally, there was investment from Luo Yonghao. This announcement at the Smartisan launch conference earlier this year initially drew laughter, but as people gradually understood the e-cigarette market, they all gave Zhu Xiaomu a thumbs up, praising his foresight. #p#分页标题#e#

In fact, during the two months from the end of 2018 to the beginning of 2019, nearly ten new e-cigarette brands emerged, including Wel Whale, LINX, YOOZ, MOTI, TRYMIX, GOIN, APOC, etc., while there were still nine e-cigarette projects crowdfunding on the JD crowdfunding platform.

Reports indicate that among them, MOTI, Wel Whale, LINX, and others have received tens of millions in Pre-A round financing.

The new e-cigarette brand LINX is actually operated by several self-media big shots. Founders of platforms like Tongdao Dashi, Military Weapons Second Dimension, Weimei Holdings, and Visionary are part of the main creative team of this brand. It is said that the idea to enter the e-cigarette market was unanimously approved during a gathering in a courtyard in Beijing.

It is worth mentioning that the total number of fans of these self-media platforms is about 350 million, and they have already achieved considerable profits in their attempts in new media e-commerce. Therefore, before officially launching, LINX's external communication focused not on e-cigarettes but on "new consumer products."

If you carefully read the interviews about LINX, you will find that they rarely talk about technology; instead, they focus on marketing. LINX's promotional posters also confirm this—exquisite designs, business-like compositions, and multi-dimensional displays of products make LINX appear full of fashion and high-end design flavor.

On January 27, LINX started pre-sales. According to data released by LINX's official WeChat account, they sold 5,000 e-cigarettes within 45 hours of launch. If calculated at a price of 299 yuan for a set (1 e-cigarette + 4 pods), the total sales revenue from this pre-sale exceeded 1.5 million yuan.

It seems that this market is enormous. However, the heat transmitted from abroad makes e-cigarettes seem more like a trendy toy rather than the original concept of quitting smoking or replacing cigarettes.
In fact, due to the presence of many unknown additives, e-cigarettes have already faced very strict regulations abroad.

Data can illustrate the problem. An article published on the website "Business Circle" pointed out that now e-cigarettes doing pure OEM orders have seen gross profits drop to 15%. A few years ago, it could even reach 80%.

A few years ago refers to the period from 2008 to 2010. At that time, the e-cigarette market was still in its cultivation stage, with no more than ten companies in the industry. However, around 2012, as the market in Europe and America began to rise, domestic OEM companies rapidly increased, reaching over a hundred at one point.

By the second half of 2017, some countries and cities abroad began to reduce e-cigarette production plans due to restrictions from the FDA (U.S. Food and Drug Administration). However, the reductions were not solely due to regulation. For example, the Irish company Healthier Smoker terminated plans to invest millions of euros in e-cigarette production and closed its e-cigarette factory.

The reason for the closure was that the e-liquids produced by this e-cigarette company infringed on the intellectual property rights of some internationally renowned cigarette brands owned by Japan Tobacco.

Therefore, the overall environment for e-cigarettes has never stabilized. Additionally, although the domestic market for e-cigarettes has been cultivated for many years, Chinese smokers still tend to resist this new thing. Data shows that by 2017, the global number of e-cigarette users reached 35 million, while the number of e-cigarette users in China was only 500,000.

Can the vaping industry last long term? From an industrial perspective, the domestic e-cigarette market, under the spotlight of hot money, is closer to money than ever. One reason for this is the low entry barriers and diverse promotional forms. After all, we are still in a stage where "you can say whatever you want." As the industry becomes more standardized in the future, and giants build their moats, there will be fewer opportunities for small players to profit. Interested parties can contact the hotline: 17682343645 or WeChat: vapeos;