Policy Pressure and the Pandemic: How Can the Already Struggling E-Cigarette Industry Survive?

Today is February 13, and the pandemic continues, with its impact on various industries still expanding. The e-cigarette industry, which once dominated the investment scene in 2019, is feeling the chill of the market once again due to the pandemic.

On October 30, 2019, just before the Double Eleven shopping festival, a notice was issued that caused the e-cigarette industry's development momentum to take a sharp turn downward, cutting off online channels. For the e-cigarette industry, this not only meant that all costs invested in the "Double Eleven" were wasted but also triggered price wars and inventory issues among offline distributors.

Leading e-cigarette brands began to focus their efforts on offline sales and international expansion, while some smaller brands shifted to other industries or shut down entirely. However, just as various e-cigarette brands were intensifying their efforts in offline retail channels, the arrival of the pandemic directly hindered their progress in capturing offline markets.

However, there was also some good news for e-cigarettes today. On February 12 at 10:23 AM, the e-cigarette sector index reported 1190.273 points, with an increase of 2%. Among the stocks in the sector, the top five gainers were: Kosen Technology up 5.43%; Yiwei Lithium Energy up 5.05%; Yinghe Technology up 3.33%; Yingqu Technology up 0.38%; Dongfeng Motor down 0.16%. This is positive news for the giants in the e-cigarette supply chain. Does this provide any substantial help for e-cigarette brands during the pandemic? How are major e-cigarette brands responding to the pandemic and regrouping?

On February 11, RELX, a leading domestic e-cigarette brand, released a message on its WeChat public account regarding its response to the pandemic. RELX has set up a fund of 20 million yuan to support its stores and assist in the gradual reopening of retail outlets. Notably, RELX has allocated 500 smart vending machines to support offline "contactless" sales. This new retail push can help address the obstacles to e-cigarette sales during the pandemic while also facilitating the "reopening" of the offline market.

Recently, Pod has also released a message on its official WeChat platform titled "Pod Recommendations: Service Guide During the Pandemic." It states that during the pandemic, Pod has opened a phone service to provide users with product consultations, store navigation, home delivery, and phone ordering services.

According to Pod partner Fang Hui, Pod resumed work on February 10, and except for key pandemic prevention areas, employees in Shenzhen, Beijing, and other regions have returned to work. According to the pandemic prevention requirements in Shenzhen, Beijing, and other areas, employees from key areas like Hubei are not required to return to their workplaces, following pandemic prevention policies. Employees returning to their workplaces must strictly adhere to local pandemic prevention requirements.

In addition, there are rumors that Fulu e-cigarettes are facing financial difficulties and have recently started to liquidate stock. However, inquiries to Fulu CEO Zhu Xiaomu were not confirmed. Additionally, it has been reported that Fulu has begun layoffs after resuming operations.

Xuejia e-cigarettes are currently operating with all employees working from home until February 17. According to an employee of Xuejia e-cigarettes, their stores have not yet received notifications to resume operations and are waiting for the pandemic to improve.

Moti e-cigarettes have also delayed their resumption of work until February 17 to strengthen pandemic prevention measures. At the same time, Moti has just released a "Purchase Guide" on its WeChat public platform, aimed at guiding users to find purchase locations accurately.
 

Aiwei e-cigarettes, on Valentine's Day, spread a promotion through social media offering "Buy 5 Get 1 Free," indicating that Aiwei is restoring sales through a micro-business model. According to Aiwei e-cigarette marketing personnel, the functional departments are mostly working from home.

Yuntun e-cigarettes' co-founder Huang Zheng told us: "Since January 31, all Yuntun colleagues have been working from home due to the pandemic, and the time for returning to the office is still uncertain. Yuntun will cooperate with government requirements for all registrations and filings, needing to register relevant personnel's locations in the area."

Additionally, according to foreign media reports, e-cigarette manufacturer Juul has raised over $700 million in debt to maintain its operations. Just a week before this financing, tobacco company Altria wrote down its investment in Juul by $4 billion, nearly a third of its initial investment of $12.8 billion in the company. According to insiders, some executives at Juul, which had a rocky start in China, have recently left the company.

As diseases related to e-cigarettes sweep across the U.S., regulatory scrutiny has increased, impacting the company. Juul laid off over 650 employees last November and announced a plan to cut $1 billion in expenses. It also withdrew its most popular flavors from the U.S. market and scaled back its international expansion plans.

From the interviews with several e-cigarette brands, it can be inferred that due to the pandemic, most e-cigarette companies are still in a "suspended operation" state. Brands that have slowly resumed operations have made comprehensive and detailed arrangements for safety during the pandemic.