Image source @ Visual China
Text | Those things about the Internet
The e-cigarette industry storm has risen.
With the decision of the State Council to amend the Implementation Regulations of the Tobacco Monopoly Law of the People's Republic of China on November 26, the unresolved issue of "who will take care" has settled, and the identity of e-cigarettes is clear.
The next step will be the question of "how to manage".
Combined with the recent e-cigarette national standard draft meeting, the formulation of product quality standards is also accelerating, it is foreseeable that the e-cigarette industry that once grew barbarically is bound to go to the top.
The past two years have been the outbreak of e-cigarettes.
The increasing acceptance of e-cigarette products by consumers, the active marketing activities of tobacco companies in the early stage and the continuous innovation of e-cigarette products have driven the rapid development of the global e-cigarette market.
From 2016 to 2020, global e-cigarette sales began to grow wildly year by year, from $9.27 billion in 2016 to $19.62 billion in 2020, with a compound growth rate of more than 20% in the past five years.
Behind the data of cattle X coaxing, it is even more perceptive that whether it is from the consumption cycle of the market or from the perspective of existing consumer penetration rates, the future space for e-cigarettes is still very large.
But under the new regulations, how can the e-cigarette runners who rush to run quickly return to the track?
The question that must also be faced is that with the further evolution of supply chain integration, prohibition of online marketing and the future development pattern of brands, the war has also risen from local to global, how to reach offline channels to achieve global growth of brands, becoming the final battle for all brands?
The center of the "e-cigarette universe", why Shenzhen?
The world's e-cigarette center is in China, and China's e-cigarette center is in Shenzhen.
Time back to 2007, e-cigarettes are still a new consumer goods category, when the domestic and foreign e-cigarette blue ocean is waiting to be excavated.
At the earliest, Chinese e-cigarette brands such as tobacco were the first to lead in the world, and Shenzhen, which has a perfect electronics industry supply chain, naturally became a product production place.
Coinciding with 2008, Shenzhen transferred processing and manufacturing and polluting industries such as electroplating and oil injection to the suburbs, and Shajing just undertook these industries.
So in a short period of time, in the manhole town with a total area of 35.79 square kilometers and a total population of about 900,000, at least 400 or 500 e-cigarette foundries gathered, together with neighboring Songgang and Fuyong, produced more than 90% of e-cigarettes for the global market.
In 2013, Ruyan and its e-cigarette patents were acquired by Imperial Tobacco, the world's fourth-largest tobacco company, for $75 million, but the decline of Ruyan did not affect Shenzhen Shajing to become the world's e-cigarette industry base.
From 2014 to 2017, in order to undertake the loss of the supply of cigarettes and the lack of sales of products in the large market, Shenzhen Baoan, Zhejiang Yiwu a large number of factories, workshops, relying on a large number of cheap labor to imitate the cottage e-cigarette, at an absolutely low price to encroach on the market share of smoke.
Under the advantage of a large number of factory assembly lines and labor force, the number of e-cigarettes manufactured in China in 2018 exceeded 90% of the total global output.
The data shows that the size of China's e-cigarette market will increase to 8.33 billion yuan in 2020, but the penetration rate of e-cigarettes is less than 1%, and it is expected that the market size will exceed 10 billion yuan in 2021.
Under the fiery market outlet, the midstream Jirui, which is backed by China's Bolton, will launch a completely owned e-cigarette brand "Sharp" in 2020, and will enter the e-cigarette consumer market with 100% of its own model.
In fact, as early as before the "sharp", there are also many foundries that launch their own e-cigarette brands in an attempt to share a piece of the pie.
Shenzhen McWell, the largest foundry of electronic cigarettes, launched Vaporesso in 2006; Shenzhen Youwei, a foundry, launched its own e-cigarette brand uwell in 2015; Shenzhen Envis, a foundry, launched its own e-cigarette brand smook in 2015; Shenzhen Yijiate, a foundry, launched Aspire in 2013; Shenzhen Jihui, a foundry, launched voopoo in 2017.
It is not difficult to foresee that in the e-cigarette market with low penetration and high profit margins, there may still be upstream supply chain brands that are eager to move and look for opportunities to create their own e-cigarette brands.
So, after the penetration rate of e-cigarettes continues to increase, where should traditional cigarettes go?
Will traditional cigarettes move closer to e-cigarettes?
E-cigarettes are the business of traditional paper cigarettes.
Due to the emergence of e-cigarettes, the sales of Tobacco in China have gradually declined, and according to the Financial Times website, China's tobacco sales fell by 2.4% for the first time in 2015.
There are currently about 350 million smokers in China, the total operating income of the tobacco products industry exceeds 1.2 trillion yuan, and if the 13% penetration rate of e-cigarettes in the United States is used, there is still a market of 150 billion yuan to compete for.
In this regard, behind the explosion of electronic cigarettes, the most question-inducing question is whether e-cigarettes will completely replace traditional cigarettes?
From a consumer perspective, it is not realistic for e-cigarettes to reach 350 million smokers in the short term.
First, according to 2019 data, the smoking rate of rural men (55.4%) is higher than that of urban (49.0%), and rural areas clearly have a larger market.
However, e-cigarettes are not allowed to be advertised and sold online, and rural smokers have become a difficult group to "touch".
Secondly, the current e-cigarette market is mainly promoting taste and appearance, and most middle-aged and older smokers cannot accept a variety of fruit-flavored e-cigarette products that are too fashionable for them in a short period of time.
In the long-term dimension, when e-cigarette binding IP continues to launch explosive models, set up more consumption scenarios and stable quality control, attracting a large number of young consumers, it will inevitably "force" more traditional cigarette companies to enter the game.
For now, even with strict regulation, there are still traditional cigarette brands in the market layout.
According to the Industrial Securities Research Report, China Tobacco Group began to lay out the e-cigarette industry chain very early.
In 2018, China Tobacco Group gradually commercialized e-cigarettes, launched its own brand of e-cigarettes, and invested in e-cigarette companies through strategic investment.
In the same period, Sichuan Tobacco launched the HNB brand "Kuanzhai Kung Fu"; in 2019, the e-cigarette brand "Leimi" under Guangdong Wuyeshen Group was established; in 2020, the e-cigarettes developed by Sichuan Tobacco and South Korea YM were exported to the Korean market, and Kuanzhai Kung Fu also tested the domestic market and opened offline experience stores in Nanjing and other cities.
So, under the situation of multi-party entry and restriction of Internet sales, how should the existing e-cigarette brands develop?
After the new national standard, the industry will be shuffled
The domestic e-cigarette national standard has opened the public comment collection stage.
Foreign policies on e-cigarettes are also undergoing significant changes.
On October 13, the US FDA announced the world's first e-cigarette brand and product to obtain a PMTA license. The FDA considers the use of the product "appropriate to protect public health." In early November, the Uk "included e-cigarettes in health insurance".
The landing policy of e-cigarettes is better than expected, but at the same time, e-cigarettes are also likely to open the collection of consumption tax, so the profit margin of enterprises that cannot pass on taxes will decline, and the performance flexibility depends on the bargaining power of the industrial chain, and the industry will usher in the situation of small enterprises clearing and the concentration of leaders strengthened.
Ai media data show that China's e-cigarette companies have grown from 45,457 in 2013 to 168452 in 2020, and as of February 4, 2021, there are 174399 existing e-cigarette companies in China.
In terms of growth rate, the growth rate of the number of e-cigarette companies in China is accelerating, with a growth rate of up to 30.27% in 2020, and the market size has expanded rapidly from 550 million yuan in 2013 to 8.38 billion yuan in 2020, with an average annual compound growth rate of 72.5% in eight years.
It is foreseeable that on the basis of low entry thresholds, large profit margins, and lack of moats, the existing market share of e-cigarette brands will be gradually divided under the situation that enterprises from all sides have entered the game.
As we all know, the current e-cigarette brand generally adopts the asset-light model of operation, and most of the relevant technology is in the hands of foundry companies, which is the reason for the homogenization of e-cigarette products, and it is also a major problem faced by the mobile phone industry when the smart phone just emerged ten years ago.
For the early rapid development of the market, the asset-light operation model occupies an absolute advantage.
However, from another point of view, when the general foundry creates its own e-cigarette brand, how should the existing e-cigarette brand set up its own moat?
The simplest answer is to develop or indirectly develop its own supply chain, followed by improved product development.
According to China Economic Network, e-cigarette companies have developed rapidly in the past eight years, from 45,457 in 2013 to 168452 in 2020, and the market size has expanded rapidly from 550 million yuan in 2013 to 8.38 billion yuan in 2020, with an average annual compound growth rate of 72.5% in eight years.
Under this situation, R&D and marketing go hand in hand, becoming the only choice for e-cigarette brands.
Reach the realities and future possibilities of the channel
After the "disconnection" of e-cigarettes, offline brand stores have become the main choice for e-cigarettes.
The advantage of laying stores is that it can improve brand exposure and establish a brand image, but the disadvantages are also obvious, the cost of specialty stores is higher, which will increase the actual operating costs of e-cigarette companies, and the store laying speed is slower, and it is difficult to quickly complete the goal of market coverage.
According to the data of the Prospective Industry Research Institute, the construction of offline channels for e-cigarettes is still in its infancy, and the total proportion of sales channels including convenience stores and small merchants, supermarkets, and specialty stores is only 19.4%.
In addition, in the market environment with insufficient penetration rate, it has also led to the setback of offline franchise store channels.
According to the survey data of blue hole new consumption on shop owners, since June, the e-cigarette market boom has continued to decline, and the store owners whose income declined in September accounted for 52% of the sample size, and more than half of the store owners' income was below 20,000 yuan, which was significantly lower than the initial single store flow of more than 20,000-30,000 yuan, and the industry entered a bottleneck period.
In addition, the imbalance in the market has emerged, and for most third- and fourth-tier and deeper markets, the growth of stores has exceeded the market demand.
Under the circumstances that the offline franchise store channel laying cost is high, the store laying speed is slow, and the actual operating cost of the e-cigarette company will be increased, the store is obviously not the most preferred choice for opening offline channels.
Through offline brand stores, e-cigarette collection stores, pop-up stores, to open channel containers, unmanned retail scenes and other diversified sales channels or become a good choice.
It can not only have its own brand stores, but also reduce expansion capital expenditure and improve the speed of laying through channels such as collection stores and pop-up stores, to open channel containers, unmanned retail scenes, etc.
In addition, compared with specialty stores, collective sales can sell a variety of brands of e-cigarette products through agents in self-operated stores.
It can eliminate a large number of store costs, but also give many consumers to compare the advantages and disadvantages of various brands, and at the same time, the way of collective sales can also strengthen our own brand, which is more beneficial for long-term development.
From another point of view, it can also replace some small brands with insufficient economy and strength.
However, the future development still needs to be considered in combination with market needs and brand strength.