A Brief Analysis of Future Development Strategies for the Vaping Market

On May 26, a report from the National Health Commission once again brought the e-cigarette market into the spotlight.

The "2020 Report on the Harm of Smoking in China" indicates that the number of smokers in China has exceeded 300 million, with a smoking rate of 26.6% among people aged 15 and older, and a male smoking rate as high as 50.5%. Wu Xiangtian, Deputy Director of the Planning Department of the National Health Commission, pointed out, "We hope that the release of the '2020 Report' will effectively inform the public about the harms of tobacco and e-cigarettes, increase smokers' willingness to quit, and help more smokers quit their addiction using scientific methods." He stated, "There is ample evidence that e-cigarettes are unsafe and can harm health; harmful substances can be produced when e-cigarette flavorings are heated, and unreasonable use of flavorings can increase the risks to e-cigarette users." In the current environment, some small e-cigarette brands that previously relied on traffic and internet marketing are gradually exiting the market under cost pressures, while leading companies like RELX are accelerating the launch of new products.

The original intention of creating e-cigarettes was to reduce harmful substances and replace traditional cigarettes. Since 2014, the global e-cigarette market has seen a compound annual growth rate of 24.2%. After the advent of modern e-cigarettes in China, the industry has experienced a market explosion, evolving from large vapor devices to heated tobacco products and then to smaller devices, all while trending towards reducing harmful substances. Additionally, to cater to the younger demographic, e-cigarettes are designed to be stylish and come in a variety of flavors.

Data shows that the scale of China's e-cigarette market has rapidly expanded, growing from 550 million yuan in 2013 to 8.33 billion yuan in 2020, with an average annual compound growth rate of 72.5% over eight years. Currently, China ranks first in the world in terms of the number of smokers, yet the penetration rate of e-cigarettes is less than 1%. It is expected that the market size will exceed 10 billion yuan in 2021.

It is worth mentioning that the National Health Commission's report caused Smoore International to drop nearly 17% on the same day, with a trading volume reaching 3.7 billion Hong Kong dollars; China’s Boton fell nearly 17.94%, and the U.S.-listed Smoore Technology also saw a pre-market drop of over 10%.

According to RELX, the e-cigarette industry has long been characterized by chaotic growth and needs continuous standardization of product manufacturing standards and industry development standards to lead the healthy development of the industry. From a rapid rise to a more stable phase, the e-cigarette industry has always attracted attention. Under the combined effects of regulation, the pandemic, and other factors, the process of survival of the fittest in the industry has accelerated, leading e-cigarettes into a more standardized and positive development period. Brand, channel, and research and development capabilities have become the three core barriers to the development of e-cigarette companies, and the industry has entered a new development stage dominated by offline channels.