Taste off "sweet", "snuff out" e-cigarettes?

It is these sweetened tastes that have successfully attracted many young people who are pursuing new trends.

E-cigarette diagram/IC

After thinking about it for a long time, Hu Han (pseudonym) finally decided not to renew his contract with the mall and close the e-cigarette store that had just completed two years of operation.

In the first half of 2019, the domestic e-cigarette market staged a scene of "a thousand smoke wars", and Hu Han entered the game while it was hot. His original intention is very simple, domestic e-cigarette fans are increasing year by year, and he wants to stand on the cusp. After more than two years of deciding to leave the market, Hu Han said that there were many dilemmas, and the new regulations for e-cigarettes only accelerated the settlement of this idea.

Driven by e-cigarette profits, dealers continue to pour in, and he sees a good business profit dilution. "The brands I joined, whether in terms of popularity or R&D strength, are far inferior to large brands, and the frequency and taste of new smoke bombs are relatively small, and customers are naturally diverted." Zero sales in Huhan's store for several consecutive days are the norm.

At the crossroads, the industry reshuffle has emerged. The Beijing News shell financial reporter found that some brands began to reduce production, cautiously considering the future of the market, and some manufacturers considered turning to overseas markets. Many retailers have gradually reduced their purchases and even begun to clear inventory to wait for changes after the policy is implemented.

Restrictions on the taste of e-cigarettes make merchants more anxious - without a variety of flavored cigarette bombs, they may lose their appeal to young people.

Nevertheless, "if you really want to give up the domestic e-cigarette market, you really can't help it." Li Ke (pseudonym), who runs an e-cigarette factory, told Shell Financial Reporter that the new regulations have bid the industry farewell to barbaric growth, while giving manufacturers a more legal environment, and there should still be opportunities in the future.

E-cigarette goodbye fruit flavor?

After visiting a number of e-cigarette stores, Zhang Lei (pseudonym) bought more than 40 boxes of his long-term smoking taste. Not long ago, when he learned that the new regulations for e-cigarettes were about to land, he was worried that manufacturers would reduce production. In order not to "cut off grain", Zhang Lei decided to stock up on more goods in advance.

From March 2021, when the Ministry of Industry and Information Technology drafted the Decision on Amendment (Draft for Solicitation of Comments), to the late November to early December 2021, when 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 Administration of Electronic Cigarettes (Draft for Solicitation of Comments) were successively revised, a series of actions indicated that the relevant state departments would strengthen the supervision of new tobacco products such as electronic cigarettes. In the "E-cigarette (Draft for Comments)", detailed provisions are made on the taste, nicotine concentration, sales and other aspects of e-cigarettes.

"Although no exact news has been received, many peers have begun to deliberately reduce the purchase volume and decide whether to continue to engage in this industry after the situation is clear." Entering 2022, Lao He (pseudonym), who runs an e-cigarette physical store in Hangzhou, told the Beijing News Shell financial reporter.

As the group of people who followed the trend into the e-cigarette market in 2019, Lao He experienced the initial crazy stage of the industry and also fell into a cold ice 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 there will be young customers who are willing to accept e-cigarettes if the taste is restricted.

The reason why e-cigarettes are popular in the young market is largely because in addition to the traditional tobacco taste, they have also developed a variety of flavors such as grapes, lemons, cola and other flavors by adding flavors such as flavors and smoke oil. And it is these sweetened tastes that have successfully attracted many young people who are pursuing new trends.

"Unlike the 'smell' of traditional tobacco, e-cigarette products are mainly sweet." Zhang Lei, who has smoked traditional cigarettes for many years, has quickly been attracted by his taste since he came into contact with e-cigarettes two years ago, "Many friends at the party chose e-cigarettes for this reason, including many women who had previously rejected tobacco." ”

Lao He also told Shell Financial Reporter that among the products he sold, the sales of old popsicles, lemons and other flavored cigarette bombs were far better than traditional tobacco-flavored smoke bombs, and the customers who bought e-cigarettes were basically young people.

Shell financial reporters found that many e-cigarette brands, including Yueke, Bode, and Xuejia, most of them have dozens of flavors.

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

Worries are not empty. After the release of the "Administrative Measures for Electronic Cigarettes (Draft for Comments)", according to the analysis of many industry insiders, the draft opinion basically refers to the US FDA standards, and the induced taste of adolescents is restricted, which also means that the previous fruit-flavored electronic cigarette bombs are likely to be restricted.

In fact, shortly after the introduction of the new regulations, Bode issued an announcement that in order to protect minors and reduce the attraction of electronic cigarettes to minors, the taste of their electronic cigarettes will be reduced, and some fruit-flavored and beverage-flavored smoke bombs will be discontinued.

A number of young people who smoke e-cigarettes told Shell Financial Reporter that due to the fear that the taste they like is restricted from production and sales, they have now moved the idea of hoarding goods, "Before they smoked a box and then went to buy, now basically buy four or five boxes every time, even if they are out of stock one day." A young consumer said.

"If there is really a large number of sweet e-cigarette bombs discontinued in the future, it is not excluded that consumers will be dissuaded." "The most directly affected is the dealer, and now you can only wait and see before deciding whether to continue this business." ”

Departure: The era of quick money is no more

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

According to the "2021 E-cigarette Industry Blue Book" data, the retail network of e-cigarettes has penetrated into cities at all levels, with 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 at the end of 2019. His original intention is very simple, the number of young people who smoke e-cigarettes in China is increasing year by year, and the consumption of cigarette bombs is also fast, which 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 an e-cigarette business.

"Business was ok in the beginning. There are thousands of dollars in turnover every day. Hu Han told reporters that in order to quickly win over young people, he has launched activities such as low prices, buy one get one free, etc., "According to the revenue trend at that time, it will return within one year." ”

However, the situation soon changed. Driven by the profit of e-cigarettes, more and more dealers have poured into it, and the shopping mall, which originally had only one e-cigarette shop in Hu Han, has appeared in just a few months with a number of peers hanging different brands, and competition has intensified.

"The brands I join, whether in terms of popularity or research and development strength, are far inferior to large brands, and the frequency and taste of new smoke bombs are relatively small, and customers are naturally diverted." Hu Han analyzed, "Although there are old customers who can barely support, they have not added new customers for several months, and zero sales for several consecutive days are the norm." ”

Hu Han had considered waiting for the end of the contract period with the manufacturer to choose to join other big brands, but the introduction of the new regulations on e-cigarettes made him hesitate, "Now I don't dare to join easily, after all, I don't know what the future of the market will be." Even if you join a big brand, the taste may be reduced. More importantly, if the tax rate becomes higher, it means that the price and price of the goods will increase accordingly, and no one can say whether the customer will still buy at that time."

Similar to Hu Han, there is Yang Bin (pseudonym), who runs an e-cigarette shop in Sichuan. Today, he has long since stopped buying goods, and even made the decision to "transform after selling the backlog of goods in his hands".

The idea of Yang Bin's transformation germinated at the end of last year, and the website of the State Tobacco Monopoly Administration opened an information channel for the main body of e-cigarette production and operation and product information, which required e-cigarette companies and retail stores to declare. Although there is no requirement to hold a tobacco license, this has given Yang Bin, who is already in ordinary business, the idea of retreating.

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

Yang Bin is clear that there are already clear provisions that similar goods cannot be sold online, but at the moment, it is only for the sake of quickly digesting and hoarding goods. "Knowing that you are at risk of violating the law at any time. But too many hoards need to be sold, otherwise the loss is large. In addition to judging whether the buyer is an adult, the way of door-to-door delivery is also considered to be 'online recommendation offline sales'. ”

"Going 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 Europe and the United States have a higher acceptance of e-cigarettes." Wang Min (pseudonym), who runs an e-cigarette foundry in Shenzhen, told Shell Financial Reporter that his factory has been doing OEM work for multiple brands. In daily exchanges, it is found that most of the sales direction of the other party is concentrated in overseas fields.

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

Also according to the 2021 E-cigarette Industry Blue Book, as of November 2021, the domestic e-cigarette retail market size is 14.5 billion yuan, and the export scale is 138.3 billion yuan, half of which is 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 Reporter that the factory has been doing OEM work for some overseas brands before, and has rich experience in quality and taste control. Nowadays, with abundant product lines, we have also begun to build overseas sales teams and channels.

In media reports, a number of e-cigarette factories in Shenzhen that specialize in foreign trade business are recruiting people. Many factories in order to catch up with the order to recruit 10 days of short-term workers, in order to add manpower to catch up with the production of electronic cigarettes, New Year's Day holiday overtime production. Some companies even said that the revenue at the end of last year increased by about 5 times compared with August and September.

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

"E-cigarettes have existed a few years ago, but few can do it well." Wang Min's impression is that in recent years, many e-cigarette brands have confidently rushed into the overseas market, but finally they have returned, "I often hear who is who has gone to sea again, who has failed." Stories like this abound in circles. ”

She told Shell Financial Reporter that manufacturers first need to have a clear understanding of local policies, consumer trends and preferences in overseas markets. Many marketing methods and products that are suitable in China are not necessarily applicable overseas. Taking electronic cigarette bombs as an example, many domestic flavors that are popular with consumers are not popular overseas. In addition, the requirements for nicotine content vary from country to country, with the United States allowing no more than 5%, while the United Kingdom stipulating that it must not exceed 2%. This requires manufacturers to make corresponding measures and research and development according to local conditions.

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

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

Legal "gold panning", hundreds of enterprises will shuffle

Although it was decided that the future focus would be mainly on overseas markets, Li Ke was still entangled.

According to the "2021 E-cigarette Industry Blue Book", the domestic market size (retail) of e-cigarettes in 2021 is expected to be 19.7 billion yuan, an increase of 36% year-on-year; the size of the foreign market (retail) is expected to be 80 billion US dollars, an increase of 120% year-on-year, and 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 are currently looking forward to 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 Wuxin 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 refer to cigarette management, it means that the identity of e-cigarettes has been legalized by the authorities. After legality, it can be included in supervision, including future operations, sales, and taxes can be in accordance with the compliance and legal system, which is a good thing for the country.

"It's really time for the e-cigarette market to shuffle. Before the industry was really too chaotic, there were honest people who wanted to make the brand and the industry bigger, and there were many players who only wanted to make quick money. "In the industry for many years, Li Ke has seen countless players who do not understand the e-cigarette industry, but are just greedy for profit margins and blindly pour in," is to take advantage of the market to invest, hoping to make a profit and run. This is also a harm to the e-cigarette market invisibly. ”

For the introduction of the new regulations, Li Ke also said that this undoubtedly gives the e-cigarette industry and manufacturers a legal identity. "In the past, I used to do a lot of things carefully, after all, I was a little careless to 'play through the boundary'. In the future, as long as the relevant regulations are followed, many businesses can be carried out."

"There will definitely be pains in the shuffling process, not only small and medium-sized enterprises may eventually withdraw from the market, but also large brands have a reduction in production and taste." But for the future of the entire industry, it is undoubtedly a positive. Wang Min said.

In fact, Fang Hui, partner and CMO of Bode, previously said in an interview with the media that there should be 3-5 national brands and about 10 regional brands in the future. This means that if you calculate according to the current more than 600 registered e-cigarette companies in the country, more than 90% of e-cigarette companies may gradually disappear in the future. According to Fang Hui, the quality of the products developed by the remaining enterprises will be greatly improved. The core competitiveness that survives this knockout game is product technology and channels.

"Previously, in order to seize the market, many e-cigarette brands had intensively launched price wars and attracted the offline sales system, and 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 are bound to withdraw, and the market left behind will become the focus of competition for other brands." Who can really laugh to the end, need more fierce competition."

Beijing News shell financial reporter Qin Che Editor Wang Jinyu Proofreader Guo Li