Will the Peak Season for Disposables Break Out in the Second Half? How Are Chinese Manufacturers Cha

With the arrival of the peak season in the second half of the year, some factories are operating at full capacity, while others may not have orders. How can they participate in capturing orders in the market? Or how to compete for market share? Even for companies facing difficulties, how can they break through?

Take disposables, for example. This year, despite facing many obstacles, the market is still growing. For instance, the European market consumes 60 million disposables every month.

For China, the challenges of entering the overseas disposable market mainly lie in compliance, new technologies, and channel strategies.

Who is leading disposables?

Currently, companies like ELF BAR, LOST MARY, ELUX, and SKE are leading the global disposable development.

Imagine these companies can ship 10 to 70 million units a month, capturing over 70% of the global monthly total of 200 million units.

For example, SKE reported a revenue of 470 million in the first quarter, equivalent to the total for the second half of last year, and the second quarter is also expected to perform well, which is a rare type of explosive growth. According to some data on their official website, they currently ship over 10 million units per month. At the beginning of the year, the global disposable e-cigarette market was estimated to ship 150 million units per month, highlighting SKE's strength. In terms of strategy, SKE has chosen a mesh core that meets European preferences for large vapor volume and rich smoke, contributing to its popularity in the European market.

With the rise of disposables, their market share overseas is rapidly increasing, with the US market expected to reach 60%-70% and the European market over 60%.

(Various markets filled with disposables)

Companies like Smoore, relying on core clients like British American Tobacco, have seen significant growth in disposables that is worth noting. Additionally, companies like Jinlong Electric and Jinjia are also worth watching in the industry chain.

What is the strategy for the second half of the year?

Currently, the disposable industry is addressing environmental issues and gradually moving towards compliance, with an overall optimistic policy outlook. However, upon closer examination, environmental issues related to disposables are relatively easy to resolve; the fundamental issues lie in reachability, product singularity, late entry into disposables, and not achieving expected outcomes, among others.

For disposables, brand, channel, and consumer engagement are all crucial opportunities. Early leading brands captured the largest opportunities when there were many brands, quickly harvesting all available channel space.

Key strategic points:

1

Be adept at quickly distributing in new markets.

Disposables have a strong fast-moving consumer attribute, especially in overseas markets, where the focus is on directly meeting the demand for smoking alternatives without needing too many variations. Therefore, the market is a direct TOB path, providing easy access for consumers.

Be skilled at rapid capabilities in new markets. As brands begin to consolidate, the future of disposables will focus on compliance, iteration, flavor changes, channel strategies, and rapid adjustment capabilities.

For instance, some large brands have dedicated product selection departments that can quickly launch appealing products. Additionally, the core demographic for e-cigarettes is 18-25 years old, a group that seeks novelty and has higher demands for iteration.

Moreover, there is a need for technological iteration. For example, mesh cores were previously used for high puff counts, but Ske was the first to apply mesh cores to compliant products with lower puff counts. This acceptance of new technology by consumers can lead to a wave of benefits.

2

Target global niche markets, such as Eastern Europe and the Middle East.

Currently, disposables are largely concentrated in the Western hemisphere, while the Middle East and Eastern Europe are gradually gaining popularity.

The European market, led by the UK, has a disposable market share of about 70%-80% (with refillable products struggling to sell), and there is also a type of disposable refillable product that is performing well. Recently, the Dubai exhibition was bustling, with over 200 companies and even major international distributors present. Notably, Dubai can radiate to the Middle East and Eastern Europe, which are becoming fertile ground for globalization.

3

Be quick to seize opportunities.

Identify market gaps where others have not entered or where there are temporary vacancies, and quickly move in to capture those opportunities. Compliance in the global market faces risks, and when opportunities arise, they must be swiftly seized.

Currently, the retail space for disposables remains vast.

In 2021, the market was less than 10 billion, but by 2022 it had surpassed 30 billion, indicating significant penetration compared to the global market share of thousands of billions.

Currently, the global monthly production is 200 million units (30% in Europe, 50% in North America), with an annual scale of over 40 billion, and it is expected to maintain a growth rate of nearly 30% over the next five years.

4

Brand positioning strategy.

Utilize brand strategies to win consumer space. Promotion and marketing are essential, whether through online outreach or direct offline engagement.

In the UK market, eight of the top ten brands are Chinese, with only Vuse Go and Myblu being foreign brands. The top four are Elf Bar, Elux, Vuse Go, and SkE. Among them, Vuse Go uses a ceramic core, while the others use cotton cores.

In overseas markets, many tobacco companies are transitioning to e-cigarettes but still cannot compete with Chinese e-cigarette companies, which have advantages in technology iteration, channel access, and scale.

During this period, brand strategy has played a crucial role in driving growth.

5

Regional reach strategy.

Large enterprises cover broad areas, while small and medium enterprises focus on regional reach within limited budgets, deepening their penetration in specific areas.

This involves channel distribution and occupation.

Channel distribution is both a strategy for category completion and a pursuit of fast-moving consumer and profitability models. Currently, in some European countries, channels are expanding from specialized e-cigarette stores to 3C kiosks, retail, and large chain supermarkets.

The changes in sales channels have detached from traditional tobacco channels, leading to different reachability.

The market is diverse; for instance, refillable products struggle in Europe, while Southeast Asia primarily favors disposable products. Major international distributors are also expanding disposables in the Middle East.

Seizing the fast-moving consumer market, disposables are expected to have several stages ahead, and it is crucial to grasp these opportunities!

In this regard, it is particularly recommended to focus on market entry strategies and customer acquisition in the second half of the year across Europe.