After online lending and blockchain, where is the ignited e-cigarette boom heading?
Data shows that in 2017, domestic cigarette sales reached 47.378 million cases, accounting for about 40% of the global total. However, e-cigarette penetration in China remains relatively low, with about 1.5 to 2 million consumers, representing only 0.47%
According to data, China’s cigarette sales reached 47.378 million large cases in 2017, accounting for about 40% of the global total. However, the domestic penetration rate of e-cigarettes is not high. There are only about 1.5-2 million e-cigarette consumers in China, representing 0.47%-0.63% of the total smoking population. Compared with these figures, the e-cigarette market naturally appears to be a vast blue ocean.
“Puffing clouds of smoke” is a highly lucrative business, and there has long been a consensus within the industry: profit margins on e-cigarettes exceed 30%; the barrier to starting a business is low, with RMB 5 million enough to establish a brand and RMB 50 million enough to enter the final round of competition. Such a low threshold has naturally sparked fierce competition for market share, with capital setting sail at just the right moment.
The momentum behind e-cigarettes is somewhat similar to online lending and blockchain, but also somewhat different. First, the business model of online lending had inherent flaws: it was trying to act like a bank while also functioning as an investment platform. As for blockchain, its business model involved both deep technical exploration and deployment of possible applications. As a result, many online lending and blockchain platforms could not resist temptation, or had poor risk control, and problems emerged when profits clouded judgment. But the business model of e-cigarettes itself is not fundamentally flawed. The product has market demand, and the user pain points it addresses are very clear.
This year’s March 15 consumer rights gala almost completely cooled off e-cigarettes, once called “the hottest entrepreneurial trend of 2019.” Laboratory research certified by Johns Hopkins University in the United States and the Institute for Global Tobacco Control showed that e-cigarettes also contain many harmful substances and are no less harmful than cigarettes. In some countries, including the United States, e-cigarettes have even been classified as “tobacco products,” and many cities in China have already begun banning e-cigarette use in smoke-free areas.
State broadcaster CCTV added another blow, saying that long-term e-cigarette use can create nicotine dependence just like smoking cigarettes, which runs counter to the original promise of e-cigarettes—“health.” Investors and entrepreneurs in the e-cigarette sector have been complaining bitterly, but will this ignited e-cigarette “trend” really go cold for good?
The March 15 gala seemed like a broad attack by CCTV on the e-cigarette industry, but sharp-eyed critics noticed several key points hidden in the report: some merchants, the fact that e-cigarettes are regulated as medical products in Europe and the United States, and that some e-liquids contain formaldehyde. For a time, public education and discussion about the health effects and risks of e-cigarettes attracted widespread attention, while pessimistic commentary and various data-driven explanations from brands appeared side by side. From information compiled by internet users, it is clear that e-cigarettes have increasingly attracted capital, especially after 2018, with repeated waves of investment entering the market.
Before there is sufficient evidence to conclude that all e-cigarettes are harmful, this consumption trend will inevitably continue to grow, and the pressure on tobacco giants will keep increasing—especially in terms of investment in new-generation e-cigarettes. On the one hand, tobacco is highly harmful to human health; on the other hand, the industry is in decline, while new tobacco products show clear harm-reduction potential and carry a lower tax burden, making them an important direction for the transformation of traditional tobacco companies.
Where will e-cigarettes ultimately go? It will probably only become clear after e-cigarettes, like blockchain and online lending before them, are brought under regulation. Once e-cigarettes are regulated, the industry will be reshuffled, and some non-compliant manufacturers will be the first to disappear.
At the same time, guidance for teenagers also needs to be strengthened. E-cigarettes were originally intended as products to help smokers quit, but because of their trendy image, rich e-liquid flavors, flashy packaging, and diverse features, more and more teenagers have joined the ranks of e-cigarette users, once again casting a shadow over public health in China.
In the future, where e-cigarettes will go remains uncertain. Clear regulation is urgently needed to address multiple challenges involving policy, taxation, licensing, and more. Whether they can once again become a hot venture investment trend remains to be tested by time.
“Puffing clouds of smoke” is a highly lucrative business, and there has long been a consensus within the industry: profit margins on e-cigarettes exceed 30%; the barrier to starting a business is low, with RMB 5 million enough to establish a brand and RMB 50 million enough to enter the final round of competition. Such a low threshold has naturally sparked fierce competition for market share, with capital setting sail at just the right moment.
The momentum behind e-cigarettes is somewhat similar to online lending and blockchain, but also somewhat different. First, the business model of online lending had inherent flaws: it was trying to act like a bank while also functioning as an investment platform. As for blockchain, its business model involved both deep technical exploration and deployment of possible applications. As a result, many online lending and blockchain platforms could not resist temptation, or had poor risk control, and problems emerged when profits clouded judgment. But the business model of e-cigarettes itself is not fundamentally flawed. The product has market demand, and the user pain points it addresses are very clear.
This year’s March 15 consumer rights gala almost completely cooled off e-cigarettes, once called “the hottest entrepreneurial trend of 2019.” Laboratory research certified by Johns Hopkins University in the United States and the Institute for Global Tobacco Control showed that e-cigarettes also contain many harmful substances and are no less harmful than cigarettes. In some countries, including the United States, e-cigarettes have even been classified as “tobacco products,” and many cities in China have already begun banning e-cigarette use in smoke-free areas.
State broadcaster CCTV added another blow, saying that long-term e-cigarette use can create nicotine dependence just like smoking cigarettes, which runs counter to the original promise of e-cigarettes—“health.” Investors and entrepreneurs in the e-cigarette sector have been complaining bitterly, but will this ignited e-cigarette “trend” really go cold for good?
The March 15 gala seemed like a broad attack by CCTV on the e-cigarette industry, but sharp-eyed critics noticed several key points hidden in the report: some merchants, the fact that e-cigarettes are regulated as medical products in Europe and the United States, and that some e-liquids contain formaldehyde. For a time, public education and discussion about the health effects and risks of e-cigarettes attracted widespread attention, while pessimistic commentary and various data-driven explanations from brands appeared side by side. From information compiled by internet users, it is clear that e-cigarettes have increasingly attracted capital, especially after 2018, with repeated waves of investment entering the market.
Before there is sufficient evidence to conclude that all e-cigarettes are harmful, this consumption trend will inevitably continue to grow, and the pressure on tobacco giants will keep increasing—especially in terms of investment in new-generation e-cigarettes. On the one hand, tobacco is highly harmful to human health; on the other hand, the industry is in decline, while new tobacco products show clear harm-reduction potential and carry a lower tax burden, making them an important direction for the transformation of traditional tobacco companies.
Where will e-cigarettes ultimately go? It will probably only become clear after e-cigarettes, like blockchain and online lending before them, are brought under regulation. Once e-cigarettes are regulated, the industry will be reshuffled, and some non-compliant manufacturers will be the first to disappear.
At the same time, guidance for teenagers also needs to be strengthened. E-cigarettes were originally intended as products to help smokers quit, but because of their trendy image, rich e-liquid flavors, flashy packaging, and diverse features, more and more teenagers have joined the ranks of e-cigarette users, once again casting a shadow over public health in China.
In the future, where e-cigarettes will go remains uncertain. Clear regulation is urgently needed to address multiple challenges involving policy, taxation, licensing, and more. Whether they can once again become a hot venture investment trend remains to be tested by time.
