When Sweet Flavors Are Cut Off, Will Vaping Be Snuffed Out?

After thinking for a long time, Hu Han (pseudonym) finally decided not to renew the contract with the mall.Shut down e-cigarette shops that have just been operating for two years。

In the first half of 2019, the domestic e-cigarette market staged a scene "Battle of Thousands of Cigarettes"Hu Han entered the game while it was hot. His original intention is very simple. The number of domestic e-cigarette fans is increasing year by year, and he has to stand on the upper hand. After more than two years, Hu Han decided to leave, and Hu Han said there were many dilemmas. The new e-cigarette regulations only accelerated the settlement of this idea.

Driven by the profits of e-cigarettes, dealers kept pouring in, and he saw a good business losing its profits. "The brands I join are far inferior to big brands in terms of popularity or R & D strength. The frequency and taste of launching new smoke bombs are relatively small, and customers are naturally diverted." It is normal for Hu Han's store to have zero sales for several consecutive days.

At the crossroads, there are signs of industry reshuffling. A survey by the Beijing News Shell Financial reporter found that some brands have begun to reduce production and carefully consider the future of the market, while some manufacturers are considering moving to overseas markets. Many retailers have gradually reduced their purchases and even begun to clear their inventories to wait for changes after the policy is implemented.

Restrictions on the taste of e-cigarettes have made businesses more anxious--Without the multiple flavors of cigarette bombs, they may lose their appeal to young people.

Despite this,"I really can't bear to give up the domestic e-cigarette market." Li Ke (pseudonym), who runs an e-cigarette factory, told Shell Financial reporter that the new rules have allowed the industry to bid farewell to barbaric growth and at the same time given manufacturers a more legal environment. There should still be opportunities in the future.

E-cigarettes bid farewell to fruit flavor?

After traveling through multiple e-cigarette shops, Zhang Lei (pseudonym) bought more than 40 boxes of his long-term cigarettes. Not long ago, when he learned that the new regulations on e-cigarettes were about to be implemented, he was worried that manufacturers would reduce production. In order not to "run out of food", Zhang Lei decided to hoard more goods in advance.

From March 2021, the Ministry of Industry and Information Technology drafted the "Decision on Amendments (Draft for Comments)", and from the end of November to the beginning of December 2021, the "Regulations on the Implementation of the Tobacco Monopoly Law of the People's Republic of China" were successively revised and the "Measures for the Management of Electronic Cigarettes (Draft for Comments)" were issued. A series of actions indicate that relevant national departments will strengthen the supervision of new tobacco products such as e-cigarettes. In "Electronic Cigarettes (Draft for Comments)",Taste, nicotine concentration, sales, etc. of e-cigarettesDetailed regulations are made.

"Although we have not received exact information, many colleagues are now deliberately reducing their purchases and deciding whether to continue to engage in this industry until the situation becomes clear." Entering 2022, Lao He (pseudonym), who runs an e-cigarette physical store in Hangzhou, told the Beijing News Shell Financial reporter.

As one of the people who followed the trend and entered the e-cigarette market in 2019, Lao He experienced the initial crazy stage of the industry and also fell into a freezing period. In his view, the e-cigarette market has always existed, but with the introduction of new regulations, the future has begun to become confusing. What worries him the most is whether young customers will be willing to accept e-cigarettes if the taste is limited.

A large reason why e-cigarettes are popular in young markets is that in addition to the traditional tobacco flavor, cigarette bombs with various flavors such as grape, lemon, and cola have been developed by adding ingredients such as essence and tobacco oil. It is these sweetened flavors that have successfully attracted many young people who pursue trendy trends.

"Different from the 'smelly smell' of traditional tobacco, e-cigarette products are mainly sweet." Zhang Lei, who has been smoking traditional cigarettes for many years, was quickly attracted by their taste after coming into contact with e-cigarettes two years ago."Many friends chose e-cigarettes for this reason at the party, and many of them had previously rejected tobacco."

Lao He also told Shell Financial Reporters that among the products he sells, the sales of old popsicles, lemon and other flavors of cigarettes far exceed traditional tobacco-flavored cigarettes, and the majority of customers who buy e-cigarettes are young people.

Shell Financial reporters checked and found that most of many e-cigarette brands, including Yueshi, Platinum, and Xuejia, have dozens of flavors.

What worries Lao He is that the introduction of new regulations may determine the future direction of these sweet e-cigarettes, and most flavors may even not be sold.

Concerns are not groundless. After the release of the "Measures for the Management of Electronic Cigarettes (Draft for Comments)", according to analysis by many industry insiders, the draft opinion basically refers to the US FDA standards, and the addition of inducing flavors for teenagers is restricted, which also means that in the past, fruit-flavored e-cigarette bombs are very likely to be restricted.

In fact, shortly after the new regulations were introduced, Platinum issued an announcement stating that in order to protect minors and reduce the appeal of e-cigarettes to minors, the taste of e-cigarettes will be reduced, and some fruit-flavored and bever-flavored cigarettes will be discontinued.

Many young people who smoke e-cigarettes told Shell Financial News that they are worried that their favorite flavors will be restricted from production and sales, and now they have the idea of hoarding goods."I used to smoke a box before buying it. Now I basically buy four or five boxes every time, and I'm afraid I will run out of stock one day." said a young consumer.

"If a large number of sweet e-cigarette bombs are stopped in the future, it does not rule out that consumers will be persuaded to quit." Lao He was not worried,"The ones most directly affected are dealers. Now we can only wait and see before deciding whether to continue this business."

Leaving: The era of fast money is no longer

In the first half of 2019, the domestic e-cigarette market staged a "Thousand Cigarettes War". In addition to the large number of brands emerging, countless e-cigarette physical stores have also appeared in the streets and alleys of various cities.

Data from the "2021 Electronic Cigarette Industry Blue Book" shows that the retail network of e-cigarettes has penetrated into cities at all levels. There are an average of 1301 e-cigarette retail stores in each first-tier city, and an average of 33 in each fifth-tier city.

Hu Han entered the venue at the end of 2019. His original intention is very simple. The number of young people smoking e-cigarettes in China is increasing year by year, and the consumption of cigarettes is also rapid. This is a good outlet. Soon, he invested 100,000 yuan to join a domestic e-cigarette brand, and rented a 5-square-meter stall in a nearby shopping mall to start the e-cigarette business.

"Business was okay at the beginning. There is a turnover of thousands of yuan every day." Hu Han told reporters that in order to quickly attract young people, he has launched low-price and buy-one-get-one-free activities."According to the revenue trend at that time, we will recover our capital within a year."

However, the situation quickly changed. Driven by the profits of e-cigarettes, more and more dealers are pouring into it. In just a few months, many peers with different brands have appeared in the shopping mall that originally had only Hu Han's e-cigarette shop, and competition has intensified.

"The brands I join are far inferior to big brands in terms of popularity or R & D strength. The frequency and taste of launching new smoke bombs are relatively small, and customers are naturally diverted." Hu Han analyzed,"Although there are old customers who can barely support them, there have been no new customers for several consecutive months, and it is normal for sales to be zero for several consecutive days."

Hu Han once considered waiting for the end of the contract period with the manufacturer and then choosing to join other big brands, but the introduction of new e-cigarette regulations made him hesitate."Now I don't dare to join easily. After all, I don't know what the market will look like in the future. Even if you join a big brand, the taste may diminish. More importantly, if the tax rate becomes higher, it means that the price and selling price of the goods will increase accordingly. No one can say whether customers will still buy it at that time."

Hu Han has similar ideas, including Yang Bin (pseudonym), who runs an e-cigarette shop in Sichuan. Now he no longer purchases goods, and even made the decision to "transform after selling the backlog of goods in his hands."

Yang Bin's idea of transformation sprouted at the end of last year. The website of the State Tobacco Monopoly Administration opened a channel for information on e-cigarette production and operation entities and product information, requiring e-cigarette companies and retail stores to declare. Although there is currently no requirement to hold a tobacco license, this gave Yang Bin, whose business was already average, the idea of withdrawing.

In order to quickly sell goods, in addition to physical sales in stores, Yang Bin also issued a promotion of "e-cigarette door-to-door delivery" in the WeChat group and QQ group of customers he was familiar with. He marked the taste and price of e-cigarettes in detail. Whenever a customer places an order via phone or WeChat, he or she is responsible for delivering the goods to his or her door.

Yang Bin knows that there is a clear stipulation that similar products cannot be sold online, but at this moment, he is only hoarding goods for quick digestion. "Know that you are at risk of violating rules at any time. But too much hoarding needs to be sold, otherwise there will be a big loss. In addition to judging whether the buyer is an adult, the door-to-door delivery method is also regarded as 'online recommendation and offline sales.'"

"Going out to sea is more like a 'gamble'"

E-cigarettes are still regarded as a golden track, and more and more manufacturers and brands are beginning to shift their focus to overseas markets.

"Compared with the domestic market, consumers in European and American countries are more receptive to e-cigarettes." Wang Min (pseudonym), who runs an e-cigarette OEM in Shenzhen, told Shell Financial that his factory has been doing OEM for multiple brands. In daily exchanges, it was found that most of the other party's sales directions are concentrated in overseas fields.# p#pagination title #e#

The reporter learned that the penetration rate of e-cigarettes in overseas markets has been much higher than that of domestic markets for many years. The "Global E-Cigarette Market Penetration Rate in 2021" data released by Ai Media Consulting shows that the United States ranks first with a penetration rate of 38%, and the second place is Japan with a penetration rate of 30.3%. In contrast, the domestic market penetration rate is 1.5%, ranking last among major e-cigarette consuming countries.

Also according to the "2021 Blue Book of the E-Cigarette Industry", as of November 2021, the domestic e-cigarette retail market was 14.5 billion yuan, and the export scale reached 138.3 billion yuan, half of which was sold to the United States.

Naturally, going to sea seems to be the best choice for e-cigarette factories at the moment.

"The company's focus this year has indeed shifted to overseas markets." Li Ke (pseudonym), who runs an e-cigarette factory, told Shell Financial that the factory has been doing OEM work for some overseas brands and has rich experience in controlling quality and taste. Nowadays, with abundant product lines, we have also begun to build overseas sales teams and channels.

According to media reports, many e-cigarette factories in Shenzhen that focus on foreign trade are recruiting people. Many factories urgently recruit short-term workers for 10 days in order to catch up with orders, use additional manpower to make e-cigarettes, and work overtime during the New Year holiday. Some companies even said that their revenue at the end of last year increased about five times compared with August and September.

The hot foreign trade market has attracted many domestic brands, but it is not easy to gain a foothold overseas. The long-term cultivation of local brands and the influx of counterparts from all over the world have made the competition particularly fierce.

"E-cigarettes have existed for a few years, but few can do it well." Wang Min has the impression that in recent years, many e-cigarette brands have rushed into overseas markets with confidence, but in the end, they have failed."I often hear of who has gone to sea again and who has failed. Such stories abound in the circle."

She told Shell Financial reporter that manufacturers first need to have a clear understanding of local policies, consumption trends and preferences in overseas markets. Many marketing methods and products that are suitable in China may not be suitable overseas. Taking e-cigarette bombs as an example, many domestic flavors that are popular among consumers are not popular overseas. In addition, the requirements for nicotine content vary from country to country. The United States allows no more than 5%, while the United Kingdom stipulates that the content should not exceed 2%. This requires manufacturers to take corresponding measures and research and development based on specific local conditions.

More importantly, overseas markets have their own cigarette cultures, coupled with consumers 'recognition of the brand, taste preferences, and the establishment of the brand's operation team in the local market, have all become problems that need to be solved for overseas brands. Therefore, not only is it difficult for small and medium-sized teams with limited costs to stand out, but it is also difficult for even leading brands to achieve explosive growth.

"Going out to sea is more like a 'gamble'. In addition to competing with peers, we also need to adapt to different regulatory policies, cultural differences, consumer habits and other issues. Once the decision goes wrong, the final result will only end in failure." Wang Min said.

Legal "gold rush", hundreds of companies will reshuffle

Although he decided to focus on overseas markets in the future, Li Ke was still conflicted.

According to the "2021 Blue Book of the E-Cigarette Industry", the domestic market size (retail) of e-cigarettes in 2021 is expected to be 19.7 billion yuan, a year-on-year increase of 36%; the foreign market size (retail) is expected to be 80 billion US dollars, a year-on-year increase of 120%. The three-year compound growth rate is 35%.

Obviously, this is also the reason why many e-cigarette manufacturers are reluctant to give up easily. Shell Financial reporter learned during the interview that many brand owners currently have expectations for the future. E-cigarette brand Bode once told Shell Financial Reporter that the new regulations mean that e-cigarettes have an official identity. Brands such as Fog Core Technology and Xiwu also responded that the company firmly supports the revision of the regulations and will continue to increase investment in research and development in the future to provide users with high-quality products.

Internet analyst Ding Daoshi said in an interview that if e-cigarettes can be managed according to cigarette management, it means that the official has legalized the identity of e-cigarettes. Once it is legal, it can be included in supervision, including future operations, sales, and taxation, which can be handled in accordance with a compliant and legal system, which is a good thing for the country.

"The e-cigarette market really needs to be shuffled. The industry was really too chaotic before. There were people who worked honestly and wanted to make the brand and industry bigger, and there were also many players who only wanted to make quick money." After many years of experience, Li Ke has met countless players who do not understand the e-cigarette industry and blindly flock in for profit margins."They just take advantage of the hot market to invest, hoping to make a profit and run away." This is also an invisible harm to the e-cigarette market."

Regarding the introduction of the new regulations, Li Ke also said that this will undoubtedly give the e-cigarette industry and manufacturers a legal identity. "In the past, I used to be careful in doing a lot of things. After all, if I were careless, I would 'cross the line'. In the future, as long as relevant regulations are followed, many businesses can be carried out."# p#pagination title #e#

"There will definitely be pain in the process of reshuffling. Not only may small and medium-sized enterprises eventually withdraw from the market, but large brands may also reduce production and taste. But it is undoubtedly a good thing for the future of the entire industry." Wang Min said.

In fact, Fang Hui, partner and CMO of Platinum, previously stated in an interview with the media that in the future, there should be 3-5 national brands and about 10 regional brands on the market. This means that if calculated based on the current more than 600 e-cigarette companies registered nationwide, more than 90% of e-cigarette companies may gradually disappear in the future. According to Fang Hui, the quality of products developed by the remaining companies will be greatly improved. The core competitiveness that survived this knockout round is product technology and channels.

"In the past, many e-cigarette brands had intensively launched price wars and wooed offline sales systems in order to seize the market. The chaotic and disorderly industry was harmful to the market, dealers and consumers." Wang Min said,"In the future, under the requirements of the new regulations, some brands will inevitably withdraw, and the market left behind will also become the focus of competition for other brands. Who can truly laugh until the end needs a more intense competition."