Tax Expectations and Rising Costs: How Can Vape Brands Overcome Price Sensitivity?

The channel side is also very worried. Will it be possible to open a store after the policy is implemented? What products will you sell in the future? How high prices can consumers accept? What kind of products can I sell to make money?

Although the tax rate issue was not brought to the table this time, everyone agreed that e-cigarette products may usher in a wave of price increases. Yang Zhiyong, a researcher at the Institute of Financial Strategy of China Academy of Social Sciences, also told First Financial Media that "e-cigarettes should be taxed with reference to cigarettes."

Based on the information obtained from interviews with industry insiders, leading brands have a greater chance of survival, and the market may need products with higher cost performance to balance the price pressure brought by paying taxes and the sales difficulties at the retail end.

Yuexie is working hard, but it is closely behind. Other brands in the market are launching products for the entry-level market in 2021. Take the Vitaixin Bee, a brand that has clear shipment data in the industry, as an example. In the 33 days after its launch, shipments have exceeded 1 million.

If the Thousand Cigarette War marks the entry of the e-cigarette industry into the 1.0 era, then this implementation of supervision has put an end to the chaotic and disorderly market, and the banner of e-cigarette 2.0 is slowly rising. After the big waves wash away, where should practitioners go?

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01 Turbulent market: practitioners 'pessimism is not consistent

The ups and downs of the e-cigarette market are obvious to all.

In June 2018, Yue Ke used 38 million yuan in financing from IDG and source code capital to launch the first shot of the e-cigarette war. In the following three years, the e-cigarette industry has always snatched the peak of public attention.

Time has come to 2019, and the e-cigarette track has entered the year of explosion, ushering in the 1.0 era, and the war of thousands of cigarettes is imminent.This industry of "getting rich overnight" has attracted countless star entrepreneurs to enter, and "Internet celebrity" players such as Luo Yonghao, Tongdao Uncle, and Huang Taiji He Chang have brought their funds to enter the market.

Sky Eye data shows that only the number of related companies with the keywords of "e-cigarettes" and "survival" status was counted, reaching 75391 in 2019. In 2020, this figure soared to 100,000 +. The listing of Yueshi took three years to create a market value of 300 billion yuan, becoming a milestone in the e-cigarette industry.

During the period from 2016 to 2018, the number of newly registered e-cigarette companies was only about 1000 each year.

At the same time, extinction is accelerating.Throughout the past two years, the e-cigarette market has experienced the impact of the epidemic after being "completely banned" online. Under this big test, many companies have been affected and are in a "suspended" state.

Sky Eye data shows that only the number of related companies with the keywords of "e-cigarettes" and "revocation, cancellation, suspension, revocation" are counted, and there are nearly 20,000 in 2020.# p#pagination title #e#

The overall anti-risk advantages of leading enterprises are highlighted.In the first half of this year alone, the e-cigarette industry experienced another 10 financing cases, with the maximum financing amount of US$200 million. Entering the second half of the year, capital's enthusiasm for the e-cigarette industry has not waned. The only cotton-core head brand in the industry has raised more than 100 million yuan, and some waist brands have also announced tens of millions of yuan in financing.

"It's quite exaggerated. I thought that the epidemic and the increase in policies had long caused the industry to shrink its head and enter the cold winter. I didn't expect that some companies would still have financing this year. The e-cigarette industry may be worth taking a look again." said Zhang Hua, an entrepreneur who worked in the e-cigarette industry in the past two years.

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02 Consumers cannot afford the costs to be passed on, so only by high cost performance can they increase the volume

I can't wait for Zhang Hua to conduct further in-depth research. At the end of 2021, intensive regulatory policies will strike like bullets. The e-cigarette 1.0 era has come to an end, and the e-cigarette industry has ushered in the 2.0 era, and a major reshuffle is inevitable.

Let's take a look at the "landing boots" first. On November 26, 2021, the "Decision of the State Council on Amending the Implementation Regulations of the Tobacco Monopoly Law of the People's Republic of China" was issued, and e-cigarettes were officially included in the supervision of the tobacco system.

Subsequently, the national standard for "Electronic Cigarettes"(draft for comments) and "Measures for the Management of Electronic Cigarettes (draft for comments)" were released one after another.The former puts forward more detailed requirements for products, such as the purity and concentration of nicotine and tobacco extracts; the latter requires qualification licenses for various chain links such as the production, transportation, and sales of e-cigarettes.

Although the tax rate has not been mentioned on the table, everyone agrees that e-cigarette products may see a wave of price increases.Yang Zhiyong, a researcher at the Institute of Financial Strategy of China Academy of Social Sciences, also told First Financial Media that "e-cigarettes should be taxed with reference to cigarettes."

According to the "Notice on Adjusting Cigarette Consumption Tax" of the State Administration of Taxation, the tax rate for all types of tobacco is: Class A cigarettes (Allocation price of 70 yuan or above/carton): tax rate of 56%, and an additional 0.003 yuan/carton will be charged, which will be collected in the production process; Class B cigarettes (allocation price of less than 70 yuan/carton): tax rate of 36%, and an additional 0.003 yuan/carton will be charged, which will be collected in the production process; Commercial wholesale: tax rate of 11%, and an additional 0.005 yuan/carton will be collected, which will be collected in the wholesale process; Cigars: tax rate of 36% will be collected in the production process; Tobacco tobacco: tax rate of 30% will be collected in the production process.

Based on the current 99 yuan/box of cigarettes, once taxes are added, the retail price will reach 226 yuan on the premise of ensuring that the profit margins of circulation links at all levels remain unchanged.

The extra costs are likely to be passed on to consumers.People in the circle of friends have begun to complain,"Originally, 99 yuan/3 tablets cost almost 500 yuan a month, which is just at the critical line that I am willing to invest in cigarettes. If the price rises, I will need to spend only e-cigarettes every month. If it exceeds 1000 yuan, it will lose me. I might as well smoke cigarettes."

There are not many such people. According to the survey, the monthly income of 75% of the population in the country is less than 10000 yuan, the average daily consumption of traditional cigarettes is between 15 yuan and 20 yuan/pack, and the budget expenditure on electronic atomization product consumption is between 500 and 800 yuan/month.

At present, most consumers have higher and higher thresholds for product quality and price, and are more willing to pay for high-priced products.The 2021 China e-cigarette industry research report also showed that among the factors of concern for consumers to purchase e-cigarettes, doubts about quality ranked first, accounting for 39.3%; followed closely by the high price, accounting for 32.5%.

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Only its CEO Liu Dongyuan once gave an example in a public speech:There are two very famous tobacco brands in my country, one is Hongtashan and the other is Hongshuangxi. Hongtashan costs 10 yuan per pack, and its annual sales volume is 3 million large boxes; Hongshuangxi costs 10 yuan per pack, and its annual sales volume is 4 million large boxes. Let's take a look at the mid-to-high-end brand Yuxi, which is 23 yuan/bag and has an annual sales volume of 1 million boxes.

Sales volume is the best explanation. Only products with high cost performance can be popular in the market.

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03? 10 million new bees will occupy consumers 'minds

Some brands in the market are already taking action to address the need for "more cost-effective".

Fog Core Technology released its entry-level product, Yue Shi Breeze, for the first time. The set contains one shot and one shot, and the price is 49 yuan. Yue Ke Breeze did not choose the metal or ceramic baking process of previous generations of products for the shell of the atomizing rod. Instead, after 24 rounds of testing, it used a lower-cost polycarbonate PC material. Later, three light breeze soft fog bombs were launched for 60 yuan. Many consumers said that Yuexie Breeze was seriously "castrated" and the taste decline caused by cost reduction was too serious.

Vita has also launched its sub-brand Vita New Bee. With the same quantity, one cigarette bomb only costs 17.5 yuan. The price is low enough, what is the quality?

Only it is the new bee that directly undertakes the production and manufacturing process of only it is the first.It can be seen from the Xinbee packaging box that the manufacturer is still the Meishenwei factory. As one of the first two factories in the industry to enter the third phase of PMTA, it has reached the standard of a thousand-level dust-free medical workshop. The thousand-level standard is mainly used for the production of high-quality optical products, as well as the testing and assembly of aircraft gyroscopes, and the production of non-implantable medical devices.

Among the structural components, Xinfeng uses the best PCTG in the industry. This model is commonly known as "Titan" and can be said to be the king model of PCTG on e-cigarettes. Most of the leading brands in the industry use this type of plastic granules.

Official data shows that Weitaxin bee uses PIMA silent bombs and does not fry oil. The tobacco oil of Vita New Bee comes from a product jointly developed by Vita Hengxin Joint Laboratory. It is reported that Hengxin Group's products are exported to more than 80 countries and regions around the world, with cumulative sales of tobacco oil reaching 500 million bottles.

The cotton core of the new bee inherits the achievements of Weiit in craftsmanship. Only its first-generation PIMA uses Arizona natural organic cotton, with an average fleece length of 39 mm. No pesticides are used during the planting process. The second-generation PIMA adds 50% natural linen blend to the first generation, so that the cotton core has better ductility to adapt to the new structure. At the same time, the addition of linen also brings certain antibacterial properties.

It is worth mentioning that after the introduction of the new national standard, cotton core will be a key factor in controlling destiny.

According to national standards, the nicotine content in tobacco oil shall not exceed 20mg/ml, and no more than 0.2 mg of nicotine shall be consumed per puff. Since the cotton core can withstand greater power, it is easy to approach the intake infinitely, thereby achieving better atomization effect and throat strike feeling. Ceramics are difficult to achieve.

But making cotton cores well is not an easy task. According to regulations promulgated by the FDA in May 2016, e-cigarette products are included in the scope of tobacco products and subject to FDA supervision. Products that do not pass PMTA certification are not allowed to be listed in the United States. So far, PMTA has only passed the certification of three cotton core companies.

It is the industry consensus that cotton core can highly restore the taste, and product quality can speak. It is reported that 33 days after the launch of the new bee, shipments have exceeded 1 million.

It is rumored that an entrepreneur once asked Liu Dongyuan for a secret. How can he control costs to such a level while ensuring the user experience? Liu Dongyuan joked at the time that he had just raised 100 million yuan, and providing consumers with cheap and inexpensive products was the most useful way. The only thing that the new bee cares about is never about a temporary loss, but wants to take this opportunity to occupy the minds of users.# p#pagination title #e#

Indeed, this is a good time.

Before the e-cigarette tax rate was implemented, Yueshi had the unique status of king in the market of 99 yuan/3 cigarettes with an average of 33 yuan per bomb. The market pattern was stronger and stronger. Only it maintained its strategic focus and was unique in the cotton core technology route.

After the e-cigarette tax rate was implemented, the single price of mainstream products quickly rose to 75.3 yuan/cigarette, while the main price-to-price ratio similar to the new bee peaked at only 30 yuan, almost maintaining the price of users before the tax reform. Consumption habits, the latter's advantages are instantly highlighted.

This is not difficult to understand. Industry insiders analyzed that this move is to quickly race the ground by exchanging losses for the market and embed new bees deeply into the minds of consumers.Liu Dongyuan once expressed similar meaning in public, but he had prepared at least 10 million cigarettes and scattered them at a loss to the market.

Occupy low prices to seize users 'minds, exchange scale for market share to cultivate consumer habits, and return to the essence of business. This road has been verified countless times in the Internet world. Looking at it now, the same seems to be true for the new bee's actions. In the era of new tobacco, let us wait and see whether Weitaxinbee, a cost-effective product, can usher in explosive growth in 2022.