Ushering in a New Era of E-Cigarettes: Current Market Development

In 2004, e-cigarettes were born in China, and by 2005, they achieved sales of 100 million yuan within just six months of entering the domestic market. By 2006, the sales revenue of the e-cigarette market was expected to exceed 1 billion yuan. The e-cigarette market was booming, and the industry was thriving.

At that time, e-cigarette products primarily focused on smoking cessation, using nicotine replacement therapy to help people quit smoking healthily. After a period of use, individuals gradually broke free from their dependence on traditional cigarettes, ultimately aiming to replace them. However, an unexpected nicotine crisis plunged the e-cigarette market into turmoil, compounded by the less-than-ideal results of smoking cessation. This led to a significant setback for e-cigarettes in the domestic market, forcing a complete halt to domestic sales and a shift to exports.

As a result of this incident, the domestic e-cigarette market fell into a slump, and e-cigarettes became virtually invisible in China, with no one paying attention. The domestic e-cigarette market truly entered a prolonged winter period.

In 2006, e-cigarettes entered the European and American markets, where they were met with enthusiasm, especially as the market matured. Due to their characteristics of not requiring combustion, being safe and healthy, and causing no pollution, e-cigarettes quickly gained popularity in Europe and America, particularly in light of the strict smoking bans implemented in public places.

As e-cigarettes became more popular and well-known in the European and American markets, the consumer base expanded significantly, gradually eating into the market share of traditional cigarettes, with market share increasing year by year. E-cigarettes have quietly become fashionable in European and American countries, with their use becoming a trend.

In the United States, e-cigarette sales doubled every year over the past four years, with a growth rate of 300%. In 2013, U.S. e-cigarette retail sales exceeded $1 billion, but still accounted for less than 1% of the entire tobacco industry. In response to the rapidly growing e-cigarette market, international tobacco giants began to transform. For instance, Lorillard acquired a leading U.S. e-cigarette manufacturer (BluCigs) in April 2012, and in October 2013, continued to acquire a British e-cigarette company named SKYCIG to expand its share in the global e-cigarette market. Reynolds, British American Tobacco, Philip Morris, and Imperial Brands also established e-cigarette subsidiaries to lay out long-term development plans.

In recent years, numerous local brands have emerged in the foreign e-cigarette market, coupled with a large number of domestic foreign trade companies producing e-cigarettes for export. The competition in the foreign e-cigarette market has entered a heated phase. Prices are continuously being driven down, and profits (or excessive profits) are declining. However, the market size continues to grow year by year, and currently, e-cigarettes account for less than 1% of the global tobacco market, indicating a very optimistic potential and market outlook.

Currently, there are 1.4 billion smokers worldwide, and in 2013, the global tobacco industry was valued at $480 billion; the global e-cigarette market reached $2.5 billion in 2013, with e-cigarette output accounting for a negligible proportion. In China, there are 350 million smokers, and from January to February 2013, the industrial sales value of tobacco products reached 198.545 billion yuan, with the annual tobacco output exceeding 1 trillion yuan, while the domestic e-cigarette sales accounted for zero, leaving the market in a blank state.

The foreign e-cigarette market is growing at a rate of 300% annually, and with the implementation of smoking bans in various countries and increasingly open policies towards e-cigarettes, it is becoming a trend for e-cigarettes to replace traditional cigarettes worldwide.

Currently, over 90% of global e-cigarettes are produced by Chinese manufacturers. The main production base for domestic e-cigarettes is concentrated in Shenzhen, Guangdong. Before 2014, all e-cigarette products produced in Shenzhen were primarily for export, with zero sales in the domestic market.

In light of the dynamic development of the foreign e-cigarette market, domestic e-cigarette companies have also begun to shift their focus to the domestic market, targeting the world's largest tobacco consumption market.

In 2014, various local tobacco companies attempted to enter the e-cigarette market. E-cigarettes were reintroduced to the domestic market, and initial interest began to emerge in Shenzhen. Sales channels primarily consisted of online e-commerce platforms, offline chain stores, and supermarket counters. Currently, no e-cigarette brand has managed to grow strong in the domestic market. In the coming years, the domestic e-cigarette market is bound to see the rise of several larger brands with significant influence.

Foreign trade companies attempting to enter the domestic tobacco market cannot simply replicate the marketing strategies of foreign e-cigarette markets; they must adjust product development and marketing strategies according to the psychology and habits of domestic consumers.

Given the vast tobacco consumption market in China, what are the development policies and current status of domestic e-cigarette companies? Let's explore the current development status of some strong domestic e-cigarette companies.

Firstly, Shenzhen Desenik Technology Development Co., Ltd. is a company that specializes in developing e-cigarettes tailored to the habits and preferences of domestic tobacco consumers.

Desenik Group was established in 2005, covering an area of over 46,000 square meters, with more than 3,000 employees and a research and engineering team of over 100 people, along with a sales team of over 50. The company integrates research and development, production, sales, and service, specializing in the development and production of high-end e-cigarettes and managing the operation and service of its brand.

In 2013, Desenik Group invested $8 million to jointly establish CARBRO with the largest tobacco company in the U.S. (the group's flavor division), officially completing the establishment of Shenzhen Desenik Group. It owns Shenzhen Desenik Technology Development Co., Ltd., Yichang Niko Electronic Technology Development Co., Ltd., Shenzhen Yindel Electronics Co., Ltd., and CARBRO, with its headquarters located at 506 Huaron Road, Dalang Street, Longhua New District, Shenzhen.

The brand of its e-cigarettes, Pinshang, is a sister product of the famous American brand SUPREME, representing the localized product of SUPREME in China. The series of products under the Pinshang brand is designed for high-end consumers in the Chinese market, including disposable e-cigarettes, rechargeable e-cigarettes, patented oil-filled e-cigarettes, refillable e-cigarettes, and the luxurious Hero No. 1 e-cigarette. The product design employs the most advanced international technology and utilizes multiple international and domestic patents, specifically developing six series of natural herbal e-liquid essences that cater to the smoking preferences of Chinese smokers, combined with durable vape pens and atomizers. The products have received ISO9001, GMP, WCA, and Walmart supplier qualification certifications.

Desenik adheres to the brand philosophy of "manufacturing the most advanced, safest, and most valuable e-cigarettes in the world," aiming to become the most valuable e-cigarette brand globally, continuously innovating technology and strictly controlling quality. With excellent quality and fashionable appearance, Pinshang e-cigarettes are selling well in global markets. Currently, Pinshang e-cigarettes are growing at a rate of 30% annually in developed countries such as Europe, the United States, and Japan, with total sales reaching 350 million yuan in 2013 and total e-cigarette shipments exceeding 50 million units. After years of market efforts and development, Desenik has become a leading enterprise in the e-cigarette industry, making a strong entry into the Chinese market in 2014.

2015 is destined to be an extraordinary year for the domestic e-cigarette industry, as domestic tobacco companies shift to the e-cigarette sector and various e-cigarette companies enter the domestic market to seize market share. The domestic e-cigarette market is bound to heat up again due to the efforts of enterprises and fierce competition. With the government's increased enforcement of smoking bans, significant tax increases on traditional cigarettes, and gradually relaxed policies on e-cigarettes, the legalization of e-cigarettes will become inevitable, and the replacement of traditional cigarettes by e-cigarettes in China will also be a trend. In the coming years, several leading enterprises with strong brand power are expected to emerge in the domestic e-cigarette industry, while many weaker e-cigarette companies will ultimately be eliminated, gradually shaping the market landscape. We look forward to seeing who will become the leader among domestic e-cigarette brands.