Has the High-Growth Era of Vaping Ended? 2FIRSTS Delivers Keynote at Dortmund Tobacco Expo

Two supremes believe thate-cigarettesThe era of rapid industrial growth is over, and the worlde-cigarette marketWe are entering the era of stock markets. However, compared with the global nicotine market, the penetration rate of e-cigarettes is still very low and has huge room for growth, far from reaching the ceiling.

[Two Susts from Dortmund] On September 15, German time, the 2023 Dortmund Tobacco Show entered its second day. At the invitation of the organizer, Ms. Hou Yuhan, global vice president and global editor-in-chief of 2FIRSTS, gave a speech at the exhibition with the theme of "Challenges and Change: Predictions for the Global Atomization Market in 2024". Hou Yuhan used a large amount of detailed data to analyze some of the current focus issues in the global e-cigarette industry, and also made predictions on the trend of the global e-cigarette market in 2024. nbsp;

Hou Yuhan said in his speech that the era of rapid growth in the e-cigarette industry has ended, and the global e-cigarette market is entering the era of stock markets, which means that competition among companies will become more intense. However, compared with the global nicotine market, the penetration rate of e-cigarettes is still very low and has huge room for growth, far from reaching the ceiling. So, what has prevented the rapid growth of e-cigarettes? The two supremacy are considered to be the two major factors of supervision and technology.& nbsp;

Ms. Hou Yuhan, Global Vice President and Global Editor of 2FIRSTS, gave a speech at the Dortmund exhibition| Source: Two supremacy 

How to break the current ceiling? The two supremacy believe that change is needed, and this change will occur in areas such as business models, technology, and regulation. For example, in terms of business models, channels may need to be re-established; in terms of supervision, it will be more systematic and scientific. nbsp;

How will the global e-cigarette market change in 2024? The two supremacy believe that from supervision to market demand, e-cigarettes will complete the transformation from fashionable FMCG products to returning to the essence of tobacco; from the perspective of environmental protection and consumer experience, e-cigarettes, especially large-capacity products, will become market darling. In this context, industry competition, especially between leading international tobacco companies ande-cigarette companiesThere will be a head-to-head confrontation.& nbsp;

Despite this, the two supremacy still believe that technology and regulation will drive the e-cigarette industry to spiral up, spawn new business models, and open up a broader market. nbsp;

Ms. Hou Yuhan is giving a speech| Source: Two supremacy 

The following is the full text of the speech: 

Every day, nearly 8000 global industry professionals learn about the world through 2FIRSTSe-cigarette industryNews and industry analysis.& nbsp;

2FIRSTS focuses on the most important issue in the global atomization industry, and so does our target audience. nbsp;

They come from the decision-making levels of regulatory agencies, supply chains, brands and channel operators in various countries; as well as industrial institutions and global mass media, institutional investors, etc. nbsp;

The core value of 2FIRSTS is-dialogue with key people 

Over the past year, my team and I have provided in-depth reports on the global atomization industry. We released a total of 3624 pieces of information and provided on-site reports on 17 exhibitions around the world; interviewed 83 regulatory agencies, associations, corporate executives and other professionals; released 54 key industry data; and communicated with regulators in 6 countries.& nbsp;

In these continuous observations, we try to gain insight into the future direction of the global atomization industry. nbsp;

Intertabac is the most influential tobacco exhibition in the world, and I am honored to share our thoughts with you here.& nbsp;

First of all, I would like to introduce to you a Chinese term "volume". Over the past year or so, we have heard more and more practitioners use this term to describe the global atomization market." nbsp;

The concept of "volume" comes from the sociology of Inversion. About five years ago, the word was increasingly mentioned in the business and workplace fields. It is extended to describe vicious internal competition and transitional competition. nbsp;

speech site| Source: Two supremacy  #p#pagination title #e#

In the case of "rolling", all participants face this dilemma: abandoning competition means withdrawing from the market, while participating in competition means huge investment but cannot bring about benefits and efficiency improvements. 

Currently, manye-cigarette brandsare facing such a dilemma.

 Then why does the phenomenon of "curling" appear? Because the global e-cigarette market has entered the era of stock markets. The first fact I want to share with you is:The era of high growth in the e-cigarette industry is over. 

Let's first look at a chart, which shows the growth of various exporting countries in 2022; and the chart on the right is a comparison of data among major exporting countries in the first half of 2023 (January to June). We can clearly see that growth is flattening out.& nbsp;

 We can look at the specific development and changes from the export side of China and the import side of the US market as an example. nbsp;

On the left is the statistical chart of China's customs exports from January to July. We can see that although the export volume is still growing, the growth rate is tending to slow down. nbsp;

Let's look at the data chart of U.S. imports, which can basically be matched with export data. nbsp;

At the same time, supply chain expectations are also weakening. According to 2FIRSTS 'survey of China supply chain companies, in the first two quarters of 2023, the overall performance of the supply chain showed that more than half of the companies achieved performance growth, but 52.4% of the companies' growth did not meet expectations. nbsp;

In addition, about 19% of companies 'performance fell within expectations, while 16.7% of companies' performance fell more than expected in these two quarters. nbsp;

When the market shifts from incremental development to existing competition, and the market entry threshold is still low, market competition gradually becomes inefficient, which is the "volume" we just mentioned. Still taking U.S. customs import data as an example, while transaction volume is rising, transaction volume/unit price has been declining. Brand owners have maintained existing markets by sacrificing profits. Brand owners have fallen into low-price competition. In some markets, there are even zero profit products.& nbsp;

As for channel operators, it is easier to directly accumulate profits from brand operators than to explore markets and cultivate brands. At present, in the mainstream market, credit sales are gradually becoming normalized. nbsp;

Although we have repeatedly mentioned that the e-cigarette industry has ended a period of high growth, compared with the global nicotine market, the penetration rate of e-cigarettes is still very low and has huge room for growth, far from reaching its ceiling. What prevents the rapid growth of e-cigarettes?

We think there are two factors, regulation and technology.& nbsp;

In 2015,nicotine saltThe technological revolution represented by the United States has introduced e-cigarettes into a new era. Since 2020, disposable products, a category that was not originally valued, have rapidly expanded globally due to U.S. regulatory factors, driving a growth rate of 30%. nbsp;

Entering 2023, the unexpected growth of disposable e-cigarettes has also brought a series of problems, such as product safety, protection of minors, environmental protection, etc., which has made mainstream market regulators aware of the need to strengthen supervision of e-cigarettes. Sex and accelerated the introduction of policies. nbsp;

 As can be seen from the above figure, among the countermeasures taken by various governments to the regulation of e-cigarettes in the past year, the one-time ban has become the most mentioned content. Since May this year, the FDA has also issued "import warning orders","import refusal orders" and even "wholesale and retailers" to strictly enforce the law on disposable e-cigarette brands that have not applied for PMTA. nbsp;

In 2022, China's "Measures for the Management of Electronic Cigarettes" series of policies will be introduced. This is the world's first and most comprehensive e-cigarette regulatory policy. I think we can see the significant impact of supervision on the industry from the changes in China market after the introduction of the policy. With the leading domestic e-cigarette brandRELXFor example, since the policy was introduced,yueshiSales fell sharply in the first quarter, while they improved slightly in the second quarter, but they were still not as good as before. We believe that with the strict trend of global supervision, especially in the head market, the survival difficulties and market difficulties of brands like RELX will continue to occur.

Under the existing regulatory environment and technical level, the potential market for e-cigarette development has been saturated. If we want to expand into a larger market, we need better regulation and more innovative products.# p#pagination title #e#

The growth of e-cigarettes, if the product life cycle theory "Product Life Cycle Theory" is adopted, will be the growth of scallop types.

There may be shrinkage in some markets before the current ceiling can be exceeded. RELX is an example.& nbsp;

We all look forward to the continued growth of the industry, and to break the current ceiling, changes will be needed, which will occur in areas such as business models, technology, and supervision. nbsp;

Just now we have mentioned the issue of brand and channel involution. To break the current inefficient competition, we need to re-establish the channel business model. nbsp;

The current e-cigarette channel chain model is: manufacturer/brand owner (shipping)-head channel dealer-secondary agent dealer-tertiary agent-retailer-consumer. Current profits are no longer able to support such a long channel chain, and channels cannot shoulder the responsibility of cultivating brands and lose more important value. nbsp;

Next, we will see that large-scale chain channels will account for more shares. Brand owners must give up their dependence on large-scale channel operators and turn to deeply operate channels themselves. The market competition threshold will become higher, and the market will be concentrated on top brands. Small and medium-sized brands will gradually withdraw from the mainstream market. nbsp;

In the past, we divided e-cigarettes into open e-cigarettes, bomb-replacement e-cigarettes, and disposable e-cigarettes. This is the classification under the original technical system. Driven by market demand and regulatory compliance requirements, new categories are emerging. nbsp;

VAPORESSO COSS combines the characteristics of open, replaceable and disposable products; 

IVG2400, built-in bomb changing type or a one-time bomb changing mouth, combines the characteristics of one-time and bomb changing; 

Other e-cigarettes targeted at the Indonesian market have the characteristics of one-time and open integration.& nbsp;

In the two-pronged 2023 semi-annual supply chain research report, 40% of respondents said that they are more looking forward to innovative one-off products in the second half of the year.& nbsp;

In terms of supervision, three characteristics will be present.

First, systematize. A good e-cigarette regulatory policy at least includes market access, which governs the qualifications of operators; the other is product quality standards, which governs products; and regulatory methods, which ensure that supervision can be truly implemented.

Second, the formulation of regulatory policies should be scientific. Based on the huge influence of e-cigarette products, the government will abandon the "one-stop" strategy and instead consider multiple interests comprehensively. Regulators will also need more research support in this regard. We are concerned that China Hong Kong and Southeast Asian countries have adjusted their e-cigarette bans this year. These are all good cases.

The third is global collaboration. The e-cigarette trade has strong transnational characteristics. Relying solely on domestic supervision is not enough to support an effective and efficient supervision method. Global collaboration is needed, such as sharing licensing systems and product standard information among countries, establishing a global product safety traceability system from the supply chain to the consumer side, and strengthening international research cooperation.

In addition to the above, we believe that the following trends and changes will occur in the global e-cigarette industry in 2024:

1. From supervision to market demand, e-cigarettes will gradually complete the transformation from fashionable FMCG to the essence of tobacco.

2. From the perspective of environmental protection and consumer experience, the replaceable e-cigarette category has the most strategic market significance. In 2024, ammo replacement e-cigarettes will also return to the focus of the mainstream European market. In emerging markets, large-capacity ammo replacement will become the most preferred cost-effective option.

3. International leading tobacco companies face off against e-cigarette companies. E-cigarette companies will face diversified competitive pressures from tobacco companies, such as channels, intellectual property rights, policy lobbying and other diversified suppression methods.

The above trends are still more challenges and difficulties, and 2024 will still be a difficult year. But an Internet founder once said: Today is difficult, tomorrow will be more difficult, and the day after tomorrow will be beautiful. This expression also applies to the global e-cigarette industry.

Although we put today's global e-cigarette industry in an entangled state, we also believe that technology and supervision will drive the atomization industry to spiral up, give birth to business models, and occupy a broader market.

This was the inspiration for our design of the 2FIRSTS Logo. We believed that a more harm-reducing world would surely come.# p#pagination title #e#