What should I do if the flavor of the electronic cigarette is gone?

Recently, the State Tobacco Monopoly Administration issued an announcement that the “Measures for the Administration of Electronic Cigarettes” will be officially implemented on May 1. One of the regulations that attracts the most attention is that from May 1, only tobacco-flavored cigarettes are allowed to be sold, while other various flavors, such as mung bean, mango, watermelon, cola, etc., are not allowed to be sold. Why are the relevant departments restricting the flavors of e-cigarettes? I have seen relevant reports that this measure is mainly to protect minors from trying e-cigarettes from various novel flavors. The United States issued a similar ban on e-cigarette flavors in 2019, allowing only tobacco- and menthol-flavored e-cigarettes to be sold. So, how much impact will the “flavor ban” have on the market? At present, only about 5% of the electronic cigarettes sold on the market are tobacco original flavors, and 95% are other flavors. Therefore, the “flavor ban” must be a major negative for the e-cigarette industry in the short term. In addition to the “flavor ban”, the “Administrative Measures for Electronic Cigarettes” also regulates the upstream and downstream of the electronic cigarette industry. On the production side, supervision will be further strengthened, and a large number of small workshops that fail to meet the production conditions will be banned; on the sales side, the current brand exclusive store model will be cancelled, and a collection store model of traditional cigarette retail will be turned. At present, the general view of the market on the implementation of the policy is that it is good for the short-term and good for the long-term. Although it seems that the relevant laws and regulations are chanting “tightening spells” for e-cigarettes, more importantly, the laws and regulations also give the e-cigarette industry a legal status: no longer a “wild monster”, but a “wild monster” under the supervision of the state legal industry. That’s the news, come and see what you can learn. Did you know that this e-cigarette industry, which has just obtained legal status, will have domestic sales of 19.7 billion yuan in 2021. It is an insignificant role in the cigarette industry with a national trillion-dollar market size. However, if you look at the global e-cigarette market, China’s e-cigarette industry is the absolute “number one player”. We all know that China produces 70% of the world’s lighters, which is already an amazing market share. Guess what share of the world’s e-cigarettes China produces? The answer is 95%. Most of them are produced in an urban village called “Shajing” on the outskirts of Shenzhen. Shajing is the “Huaqiang North” of the electronic cigarette industry. It is only 35 square kilometers, but there are four or five hundred electronic cigarette factories. Products from these foundries are packed into containers and shipped to the United States, the European Union, Russia, and Japan. China’s e-cigarette exports in 2021 will reach 138.3 billion yuan, seven times the domestic sales. Is the Chinese e-cigarette industry dominating the world because the industry is not profitable and the giants are disdainful to join? Of course not. Compared with the traditional tobacco industry, the profit margin of the electronic cigarette industry is only high. In fact, the tobacco giant Marlboro entered the e-cigarette market at the end of 2018, when it spent $12.8 billion to acquire a 35% share of the American e-cigarette brand Juul and built its own production line. Unexpectedly, the market suddenly changed, and the production line was closed before construction was completed. When the market began to pick up again, the electronic cigarettes from the small foundry factory in Shajing, Shenzhen, had firmly occupied the American market. It can be said that this is a typical story of the little shepherd boy David defeating the giant Goliath. How did this happen? First, in an extremely uncertain market, flexibility is more important than size. Electronic cigarettes are such an industry that is greatly affected by policies and the market changes drastically. You may recall that as early as 2004, China’s first e-cigarette brand came out, called “Ruyan”. It took “Ruyan” three years to achieve an annual sales of over 1 billion yuan and a market value of over 100 billion Hong Kong dollars, driving the domestic e-cigarette industry to start from 0 to 1. But then, after “Ruyan” was exposed by CCTV because of over-promoting the effect of smoking cessation, the domestic e-cigarette market entered a freezing period, falling from 1 to 0. Unexpectedly, the overseas market has become a life-saving straw for the electronic cigarette industry. In the context of global tobacco control, the average annual growth rate of the overseas e-cigarette market exceeds 30%. Especially in the US market, the US FDA banned the sale of electronic cigarettes in 2011, which was rejected by the court. In the following five years, the size of the US electronic cigarette market has soared by more than 10 times, becoming the largest customer of China’s electronic cigarette industry. In the past five years, the number of e-cigarette-related companies in Shajing has also increased by 10 times. Tobacco giants such as Marlboro mentioned earlier began to plan the layout of electronic cigarettes at this time. Unexpectedly, the U.S. market has changed again. First, in 2016, the FDA issued the most stringent e-cigarette review standards in history, and then the United States continued to break out the negative news about e-cigarettes affecting health and making teenagers addicted. Frozen”, the tobacco giants who wanted to enter the game were stopped before they could put in ammunition. Dramatically, when the US market suddenly stalled, the Japanese market suddenly started again. In 2016, a very popular variety show made electronic cigarettes break the circle in the Japanese market. In the next three years, the e-cigarette market accounted for nearly a quarter of the Japanese tobacco market. This piece of cake that fell from the sky has helped China’s e-cigarette industry survive the most difficult period. You see, the early electronic cigarette is such an industry that is looking for survival opportunities in the drastic market changes. The key to winning is not scale or brand, but the ability to flexibly increase or decrease production capacity, adjust strategies, and shift battlefields, and this is the innate gene of those small foundries in Shajing that don’t seem to be standardized. Second, in addition to extreme flexibility, China’s e-cigarette industry also has a core advantage, which is that it is backed by China’s strong lithium battery industry chain. The electronic cigarette itself does not have too high technical barriers, and one of the key components is the lithium battery. China’s lithium battery production accounts for 80% of the world’s total production. The main production capacity is located in Guangdong. After the production line, it can enter the electronic cigarette factory in Shajing immediately. This convenience is unique in the world. Moreover, many lithium battery manufacturers are not only satisfied with being suppliers, they also end up doing electronic cigarette layouts in person. Those manufacturers who specialize in consumer lithium batteries will not be mentioned. You may not think that manufacturers of power batteries such as Yiwei Lithium Energy and Xinwangda have also set foot in the electronic cigarette industry. For example, Yiwei Lithium Energy owns 50.1% of the shares of McQuay, the leading e-cigarette company. Yiwei Lithium can put the money earned from electronic cigarettes into the development of power batteries, and successfully ranks among the top ten domestic power battery manufacturers. Today, China’s e-cigarette industry has gone through an era of barbaric growth. For the leading brands that have come out, stricter supervision is actually a policy benefit.

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