LawsiQOS

IQOS’s revive, e-cigarettes also have a ten billions dollars value in the market!

The niche product e-cigarette is having an impact on the traditional tobacco industry. The data shows that the global vape market in 2016 is about 10 billion US dollars, and the domestic market is about 500 million US dollars, accounting for only 5%. Soon after the rise of the e-cigarette market, capital is also entering, but the biggest risk is the control of policies and regulations.

In fact, the invention of e-cigarette originated in China. In 2003, pharmacist Han Li invented the electronic cigarette for his own health considerations.

After the birth of electronic cigarettes, Han Li founded the e-cigarette brand Cig-A-Like in the same year. At that time, the company was in the position of the industry leader, earning a lot of money in just a few years. In the peak of 2008, the sales of such cigarettes reached 278 million yuan. However, the good times did not last long. After the CCTV exposure, such as the smoking cessation effect, its sales were greatly frustrated. With the collapse of the vape, the electronic cigarette has never recovered from the Chinese market.

It was also during this time that domestic e-cigarette manufacturers began to transform into the sea. For the European and American regions where tobacco control is strict and the price is relatively expensive, it has become a breakthrough.

In the process of the reverse output of China’s electronic cigarettes overseas, overseas tobacco giants have turned their attention to the market.

For example, the industry leader Altria Group owns its own Nu Mark electronic cigarette company and its electronic cigarette product MarkTen; the US’s second largest cigarette manufacturer, Renault USA, distributes the first electronic cigarettes in convenience stores through its subsidiary RJ Renault Vape Company. — Vuse; the US’s third-largest tobacco manufacturer, Lorillard, acquired Bri, the largest e-cigarette company in the US, in 2012 for $135 million.

Until around 2014, with the foreign tobacco market policy began to regulate and vape [it extends from the word Vapour, it represents the movement of electronic cigarettes. This vocabulary even became the annual word of the Oxford Dictionary in 2014. The rise of the circle culture, the domestic e-cigarette market flames were re-ignited.

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E-cigarette type and IQOS revive

The first generation of electronic cigarette products looks close to traditional cigarettes. This one-time or semi-disposable electronic cigarette was the way when Han Li was first invented, and it was also the way when well-known American famous brands first entered the market. Although Cig-A-Like tried to promote it in China but returned to the feathers, in 2006, this product has completed the market education of electronic cigarettes in Europe, America and especially the United States.

After the Cig-a-like, there was an open system e-cigarette, because the product was more open and the playability experience was better, and the e-cigarette began to be accepted by consumers on a large scale abroad. The emergence of open electronic cigarettes has also promoted the promotion of electronic cigarette companies to the domestic market. And e-cigarettes in Europe and the United States trend culture, subculture, such a presence in the domestic market is more acceptable than initially.

IQOS brings another direction to the e-cigarette industry. IQOS from Philip Morris later changed its name to Altria Group and is the world’s largest tobacco company. It has a famous brand Marlboro. The company finally put IQOS on the market after a large number of smoking cessation user surveys and technical studies.

“The ultimate goal is to replace cigarettes with non-combustible products,” said Mar-tin Inkster, director of operations at Philip Morris International in the UK and Ireland. The Japan Tobacco Group, the world’s third-largest tobacco company, plans to invest $500 million to increase e-cigarette production. It is planned to quadruple production by 2018 to reach 5 billion.

IQOS is not currently available in China, but it does not prevent IQOS from heating up in China.

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China is the world’s largest producer and exporter of vape

At present, e-cigarette manufacturers can be divided into two categories: one is a company that specializes in designing and manufacturing e-cigarettes or e-cigarette accessories, which is generally small in scale; the other is traditional tobacco giants who develop or acquire their own specialty. Electronic cigarette companies come to compete.

According to an e-cigarette related report, the global vape e-cigarette market in 2016 is about 10 billion US dollars, of which foreign markets account for 95%, and the domestic market is about 500 million US dollars, accounting for only 5%

In the foreign market, the US market is the most extensive, about 4.3 billion US dollars, accounting for 43%; the United Kingdom 1.3 billion US dollars, accounting for 13%, Italy, Malaysia, France and other countries also accounted for a large proportion of sales.

At present, China’s e-cigarette market is about 3 billion yuan, accounting for only 5% of the global market. Although the market share is small, in terms of supply, China is the world’s largest producer and exporter of vape oil and electronic cigarettes. About 90% of the world’s vape products and accessories are produced in China. Three of the five brands are produced by China Electronic Cigarette Co., and the top five of the open e-cigarette sales are all produced and exported by Chinese companies.

Relevant statistics show that there are 316 million smokers in China, with an average of 15.2 cigarettes per person per day. The annual market size is more than one trillion. And China’s e-cigarette market has a compound growth rate of 71.1% in 2012~2016, and reached 316% in 2016. The growth rate is very fast. At the same time, compared with the domestic trillion-scale traditional tobacco market, the market space is still huge.

Electronic cigarette company began to list on the New Third Board

With the continuous development of the electronic cigarette industry, many e-cigarette companies began to list on the three boards, and the information disclosed revealed that the performance of e-cigarette companies is highly polarized.

In the industry, Avipus and McQuay achieved operating income of 915 million and 716 million respectively in 2016, an increase of 199.89% and 146.59%, and a net profit of 186 million and 125 million, a year-on-year increase of 272.08% and 227.33%. At the same time of growth, both Avipos and McQuay’s gross margin and net profit margin are stable at around 30% and 20%.

In fact, as IQOS is hot in the country and some e-cigarette companies are listed on the New Third Board, some capital and investors will also look to the field.

From 2016 to 2017, the situation of the e-cigarette industry that was originally unattended was broken, and more and more people were investigating.

There are three types of capital that are currently in contact. The first one is that it cannot be clearly seen. The second is to see that the potential of this industry is huge but it is worried that China’s regulatory risks are gone. The last one is not afraid of risk entering the market. The vast majority of attitudes are the latter two, the industry is very attractive to capital but the regulatory risks are equally huge.

At the same time, the current capital is mostly in a wait-and-see state for the electronic cigarette industry. The lack of industry targets and uncertain policy risks are the two most important reasons.

Unavoidable policy risk

Due to the short history of the e-cigarette market in China, relevant policies and regulations have not yet been issued. However, for non-local production and sales of IQOS, a banned attitude was adopted.

In May 2017, the National Tobacco Monopoly Administration issued a “Notice on Prohibiting the Sale of Imported New Type Cigarettes” to retail terminals. And pointed out that the relevant products currently on the market are flowing into the domestic market through illegal channels, which greatly disrupts the business order of the cigarette market.

With the fiery heat of IQOS, some factories that originally produced cigarette-type e-cigarettes began to transform into this “heated-non-burning” type of electronic cigarette, trying to block IQOS with low prices.

Also for policy reasons, even if these e-cigarette companies overcome the problems of process and quality control, it is not easy to push them to the market.

Currently, in the overseas market, the European Union has included e-cigarette products in the “Tobacco Products Amendment”, which sets out specific standards for the sale of e-cigarette products; the US Food and Drug Administration has also introduced new regulations to include e-cigarettes for institutional supervision for the first time.

Where to buy the IQOS

In China, these are only blank. China’s Tobacco Monopoly Law stipulates that tobacco monopoly products refer to cigarettes, cigars, tobacco, re-cured tobacco leaves, tobacco leaves, cigarette papers, filter rods, tobacco tows, and tobacco-specific machinery. This means that in China, e-cigarettes are not within the scope of the law.

At present, traditional tobacco companies have begun to develop electronic cigarette products of related brands. China Tobacco has set up an electronic cigarette research institute in Shanghai, and Sichuan Zhongyan has even introduced an electronic cigarette similar to IQOS heating and non-burning type…

Although the current policy risks are still unclear, in the face of this trillion-scale market in the future, there is no shortage of courage to rush to the stage. For them, there is no obvious policy pressure on them.

VAPE HK

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