Vaping Industry Watch: Domestic Market Shrinks While Overseas Expansion Delivers Strong Results

Domestic Export Section

According to customs statistics, in 2022, Shenzhen exported e-cigarettes worth 46.09 billion yuan, accounting for 68.3% of the national total export value. In the first two months of this year, Shenzhen exported e-cigarettes worth 7.1 billion yuan, a year-on-year increase of 38.9%, accounting for 66.9% of the national total e-cigarette export value, continuing to maintain its status as the largest e-cigarette export city in the country.

Main Characteristics of Shenzhen's E-Cigarette Exports:

Firstly, the vast majority are exported by private enterprises through general trade methods.

In the first two months, private enterprises in Shenzhen exported 6.09 billion yuan, an increase of 42%, accounting for 85.8% of Shenzhen's total e-cigarette exports during the same period. During the same period, exports through general trade amounted to 6.53 billion yuan, an increase of 40.5%, accounting for 92.1%.

Secondly, the main markets are Europe and the United States, with a decrease in the proportion of exports to the United States.

In the first two months, Shenzhen's exports to the United States were 2.29 billion yuan, a decrease of 20.1%, accounting for 32.3% of Shenzhen's total e-cigarette exports during the same period. The United States remains Shenzhen's largest e-cigarette export market, but its share has decreased by 5.8 percentage points compared to 2022.

During the same period, exports to the EU, the UK, and Russia increased by 1.9 times, 90%, and 2.7 times, respectively, accounting for a total of 40.9%.

Additionally, exports to ASEAN (the Association of Southeast Asian Nations) amounted to 420 million yuan, an increase of 1.3 times, accounting for 6%.

In the first two months of 2023

Table of Main Market Conditions for Shenzhen's E-Cigarette Exports

Unit: 100 million yuan, %, %

Global Market Section

1. Market Size & Growth Potential of E-Cigarettes

· The global e-cigarette market is expected to exceed 100 billion, with the US market share and penetration rate leading the way

The "2022 E-Cigarette Industry Export Blue Book" reports that the global e-cigarette market is expected to exceed 108 billion USD in 2022. North America dominates the global e-cigarette market with over 40% share, followed by Europe and Russia.

In terms of market penetration, the global e-cigarette penetration rate is expected to reach 7.3% in 2022, with the US leading globally at an expected rate of 30%,

followed by the UK at 27.6%, and the European market led by France and Italy at 17.5% and 11.5%, respectively.

· The global e-cigarette market is projected to grow at a compound annual growth rate of 30%, with rechargeable e-cigarettes being the mainstream in the US market

According to research data from Grandview Research, the global e-cigarette market is expected to grow at a compound annual growth rate of 30% from 2022 to 2030. In the US market, if e-cigarettes are categorized into disposable, rechargeable, and modular devices, rechargeable e-cigarettes and modular devices account for the majority of sales:

· The HNB market has significant expansion potential, with Japan, South Korea, and Europe leading globally

HNB (Heated Not Burned) products include solid e-cigarettes and heated tobacco sticks. Compared to e-vapor products, HNB has a lower global market penetration rate, with 2020 estimates at only 2.496. According to Euromonitor data, the global HNB market size reached 26.23 billion USD in 2021. Based on this, Huazheng Securities predicts that the global HNB market size will reach 163.9 billion USD by 2030, with penetration rates rising to 14.296, indicating strong future growth potential. By market segmentation, Japan holds the highest share in the global HNB market at 43%, with South Korea, Eastern Europe, and Western Europe also being major markets, accounting for 8%, 21%, and 20%, respectively, indicating broad overall development space.

2. Market Trends & Consumer Profiles of E-Cigarettes

· Closed e-cigarettes are currently the mainstream in the global market, with disposable small e-cigarettes being a good starting choice

Closed e-cigarettes (e-cigarettes with replaceable pods and disposable e-cigarettes) are currently the mainstream in the global market. Disposable e-cigarettes are closer in product form and usage habits to traditional cigarettes, making them more acceptable to consumers due to their lower initial costs. Nowadays, more companies are launching disposable e-cigarettes with a high puff count, and for new small brands, disposable e-cigarette products can be quite versatile, with product optimization directions including increasing puff counts, realistic or beautified appearances, etc. With the advantage of cost-performance, their traffic generation effect is also better. For "old smokers," rechargeable pod e-cigarettes may be a more cost-effective choice, thus maintaining steady growth in market demand.

· Disposable e-cigarettes in the US are not fully restricted by flavor

Currently, various countries are beginning to regulate and ban flavored e-cigarettes, and in 2020, the FDA released guidelines for the e-cigarette industry, leading to a reduction in flavored e-cigarettes such as fruit flavors, with an increased demand for tobacco flavors. Many e-cigarette brands have "exploited loopholes" by launching disposable e-cigarette products using synthetic nicotine to "escape" the flavor ban regulations, driving a surge in disposable e-cigarette product sales across the US, with a growth rate of 300% over two years (from August 2019 to July 2021). However, the new FDA regulations issued in March 2022 have closed these loopholes, requiring PMTA applications for synthetic nicotine products before they can be marketed, and the regulation of disposable e-cigarettes will gradually strengthen.

· E-cigarette flavors are key to consumer purchasing decisions, with varying demands across countries

For e-cigarette consumers, flavor selection is a key factor in their purchasing decisions, followed by cost-performance and puffing experience. E-liquid flavors are mainly divided into high ice and high sweetness, medium ice and medium sweetness, and low ice and low sweetness, with varying consumer preferences across countries. The mainstream flavor in China is low ice and low sweetness, while American consumers prefer medium ice and medium sweetness or high ice and high sweetness, with a high demand for creamy flavors. In Malaysia, the audience favors high ice flavors.