SNOWPLUS Launches on JD and Tmall as China-US Vape Rivalry Heats Up

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 two major domestic e-commerce platforms, "JD" and "Tmall." Its debut product is the "launch 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 electronic vaporizer in the U.S. Another unverified report claims that JUUL is expected to invest $100 million in marketing in China.

This American electronic cigarette giant was established in 2015 and captured 30% of the U.S. electronic cigarette market in just three years. After completing a $12.8 billion financing round in December 2018, JUUL's valuation reached $38 billion. The company is also known for its lavishness— 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 electronic cigarette media outlet reported, "The strong dragon challenges, who dares to fight?" Leaders from 14 top Chinese electronic cigarette companies, including SnowPlus, RELX, Lingxi, and MOTI, expressed their views.

"JUUL's entry into China will not only bring mature products but will also rapidly elevate the industry into more intense and comprehensive competition." In the aforementioned report titled "14 Electronic Cigarette CEOs Discuss JUUL's Entry into China," Wang Sa, founder of the Chinese brand SnowPlus, 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 smoke rod 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 electronic 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, sales reached 100,000 sets in the first month and surpassed 800,000 sets by July. 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 varieties have already surpassed this American brand.

"These products are crafted by us bit by bit. At the beginning of our startup, we greeted Shenzhen at 4 a.m. almost every day with 'morning.'" Wang Sa said. Currently, all electronic cigarette research and production bases are concentrated in the city recently designated as a "demonstration zone for socialism with Chinese characteristics," where electronic cigarettes are now ranked alongside mobile phones and drones as part of the "three major hardware products made in Shenzhen."

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

However, due to its Chinese roots and the pursuit of capital, today, Chinese companies account for 95% of the global electronic 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 electronic cigarette patents are owned by Chinese companies.

"It can be said that our electronic 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 electronic 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 clearly toned down significantly. 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 Wang Sa, founder of SnowPlus. On the packaging of SnowPlus products, 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 monopolies, but data on the purchasing entities, smoking demographics, and frequency of use 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 are applied to vaporizers, companies can gradually master the production, sales, and user demographics of electronic cigarettes, and analyze their behavioral habits. For example, through facial recognition technology in vending machines and statistics on the frequency of use of electronic cigarettes, big data reports can be formed to achieve the goal of smoking control. This is what is referred to as "technology changing social governance."

While combating JUUL on e-commerce platforms, Chinese electronic cigarette brands, including SnowPlus, have also begun their own overseas expansion. "From JUUL's global market layout, this company's ambitions are significant. It has already opened markets in Germany, France, the UK, Switzerland, Canada, Russia, and Israel," Wang Sa said. "We believe that the electronic 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 electronic cigarette battle has already begun to spread globally.

Appendix: Industry CommentaryJUUL China Pricing: A Little Trick!

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

The smoke rod costs 299 yuan, and the pods cost 37.25 yuan each. The normal price for "one rod and six pods" is 299 + 37.25 x 6, resulting in a final price of 522.5 yuan.

The launch price is 369 yuan, which seems cost-effective. Domestic electronic cigarettes (like SnowPlus—editor's note) offer "one rod and two pods" for 298 yuan, while JUUL offers "one rod and six pods" for 369 yuan.

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

However, JUUL might say: I have a high brand premium!