Is 2021 a Good Time to Start a Vaping Business? Where Can You Find Wholesale Supply Sources?
1. Traditional smoking methods needed improvement, and e-cigarettes emerged in response.
The modern e-cigarette was invented by a Chinese inventor. As early as 1963, American inventor Gilbert A. Herbert applied for a patent in the United States. The patent office granted a patent for a smokeless, non-combustible cigarette, which was one of the earliest technologies related to transforming traditional cigarettes. Of course, because tobacco control efforts were almost nonexistent at the time, the product was never really promoted. In 2003, Chinese pharmacist Han Li invented the first truly modern e-cigarette. The following year, Han Li became the first to mass-produce the product globally and sell it in the Chinese market. In 2005, Ruyan Technology began exporting its e-cigarette products overseas. In the following years, Sanzhong International entered a rapid growth phase with Ruyan e-cigarettes and expanded sales to Europe and the United States. From 2008 to 2012, the U.S. FDA's attempts to ban e-cigarettes went through many twists and turns and ultimately ended in failure. The opening of the U.S. e-cigarette market also prompted major international tobacco companies to enter the field, further driving industry growth.
2. E-cigarette industry chain: China as the manufacturing center, Europe and the U.S. as the demand centers
The e-cigarette industry chain includes upstream raw material suppliers, e-cigarette designers and manufacturers, and downstream sales companies. Driven by increasingly strong demand in Europe and the United States as well as domestic policy regulation, e-cigarette products have formed a global industry chain pattern with China as the manufacturing center and Europe and the U.S. as the demand centers. At the upstream raw material level, this can be divided into battery material suppliers (batteries, cells, and control circuits), atomizer material suppliers (plastic, glass, metal hardware, and heating resistors), and e-liquid raw material suppliers. The midstream segment mainly consists of e-cigarette design and manufacturing, which can be divided into specialized e-cigarette manufacturing companies and the manufacturing divisions of international tobacco giants. Domestic independent brands hold a relatively small market share. Domestic e-liquid companies mainly rely on OEM/ODM models, producing for well-known overseas brands. Downstream, products are transported through agents and distributors to retailers, including well-known e-cigarette brands, large supermarkets, convenience stores, and pharmacies. At present, the e-cigarette consumer market is mainly concentrated in overseas countries such as the United States and the United Kingdom. As the market matures, the currently fragmented e-cigarette manufacturing industry will be consolidated in the future. Companies with channel advantages are expected to rely on stable order resources to lead industry consolidation, complete the layout of the entire e-cigarette industry chain including battery cells, e-liquid, atomizers, and other components, and shift from B2B to B2C to strengthen upstream and downstream control while gaining more profit across the industry chain.
3. The global e-cigarette market is growing at an astonishing rate, with Europe and the U.S. as the main consumer markets
Due to the rapid development of the e-cigarette industry, tobacco giants have stepped into alternatives to traditional tobacco, and market capacity has grown at an astonishing rate. As an emerging product, e-cigarettes have achieved rapid development over the past decade. According to statistics, the global e-cigarette market was worth about US$416 million in 2010, and by 2016 market capacity had expanded to US$7.1 billion. The market grew 17 times in 6 years, with a compound annual growth rate of 60.5%. The e-cigarette industry is expected to maintain strong growth momentum in the future. By 2018, industry size was expected to exceed US$10 billion, with a compound annual growth rate of 50% during the period. The rapid growth of e-cigarettes is bound to drive substitution away from traditional tobacco.
From a regional perspective, the world’s main e-cigarette markets are currently Europe and the United States. Data shows that in 2016, the top three markets for global e-cigarette consumption were the United States, the United Kingdom, and Italy, accounting for 43.2%, 12.7%, and 6.9% of global e-cigarette sales respectively. Although China produces more than 90% of the world’s e-cigarettes, the products are mainly exported, and domestic e-cigarette consumption accounts for only 6% of the global total.
Ninety percent of the world’s e-cigarettes come from Shenzhen, China, but unfortunately the Chinese market still knows very little about e-cigarettes. At present, the domestic market is not large and there is little brand effect, mainly because most e-cigarette companies focus too heavily on overseas markets. For example, 95% of the market for the major e-cigarette brand “SMOK” is in Europe and the United States. Brands like SMOK that have operated overseas for many years are not necessarily well known in China. Of course, with China’s rapid economic growth and the rise of a younger generation of consumers, the future of e-cigarettes in China is still very promising. After all, China has 350 million smokers!
