The E-cigarette has become an innovative electronic consumer good, increasingly popular in the world. According to data from iiMedia Research, China’s e-cigarette market was 550 million yuan in 2013 and increased to 8.38 billion yuan in 2020, with a compound annual growth rate of 72.5% for eight years. It is expected to exceed 10 billion yuan in 2021.
THE CORE IDEAS:
China has a large number of potential e-cigarette users and a bright future for the industry
China’s e-cigarette and vape market is expanding rapidly. Data show that the size of China’s e-cigarette and vape market was 550 million yuan in 2013 and increased to 8.33 billion yuan in 2020, with a compound annual growth rate of 72.5% in eight years. According to analysts from iiMedia, China currently has the largest number of smokers in the world, but the e-cigarette penetration rate is less than 1%, indicating that China’s e-cigarette industry has a huge space for development, and the market is expected to exceed 10 billion yuan in 2021.
The majority of e-cigarette users are young and middle-aged males, and smoking cessation is the main purpose
Data show that the majority of e-cigarette users in China in Q1 2021 are male, accounting for 64.9%. Most of them are young and middle-aged, accounting for nearly 70%. More than half of users think e-cigarettes can relieve nicotine dependence and switch to smoking, and the variety of flavors of e-cigarettes is also attractive to users. In addition, battery life, ease of oil change and price are the main areas that users expect e-cigarette products to improve.
Heating non-combustion e-cigarette equipment has obvious advantages and is expected to become a new growth point of the industry
Heating and non-burning e-cigarette devices are less harmful than traditional tobacco and the most similar products in taste, which are popular among users. Survey data showed that in February 2021, 35 percent of Chinese e-cigarette users preferred heated, non-flammable e-cigarettes. User demand drives the development of the product market. It is estimated that the market scale of heated and non-flammable e-cigarettes in China will reach 2.30 billion yuan in 2021.
EXCERPTS FROM THE REPORT:
Comparative analysis of e-cigarette and traditional tobacco
Analysis of global e-cigarette market size data from 2014 to 2022
According to the development of the global e-cigarette industry, the scale of the e-cigarette industry is generally on the rise. The global e-cigarette and vape market continued to grow in 2020, reaching $42.4 billion, up 15.6% year on year. Although various countries have introduced regulatory policies on e-cigarettes, the enthusiasm for the development of the e-cigarette and vape industry remains undiminished. The strong growth of the global e-cigarette and vape market is mainly attributable to increasing consumer acceptance of e-cigarette products, aggressive marketing activities by tobacco companies, and accelerated innovation and product development processes by e-cigarette manufacturers.
Analysis of global e-cigarette and vape market sales structure data in 2019
From the perspective of the global e-cigarette and vape market, the current e-cigarette market is highly concentrated, mainly concentrated in the US e-cigarette sales market. Sales of e-cigarettes in the United States reached $16 billion in 2019, accounting for 48% of the global total, making it the world’s largest consumer of e-cigarettes. The second is the UK, France, Germany and other countries, where e-cigarette sales account for more than 5% of the global e-cigarette culture has gradually become popular, and e-cigarette and other new tobacco products are highly sought after by consumers.
Analysis on the development history and characteristics of China’s e-cigarette industry
China’s e-cigarette industry started in 2003, when Chinese pharmacist Han Li applied for the first patent for modern e-cigarettes, which ushered in the era of modern e-cigarettes in China. China’s e-cigarette industry has experienced three stages: initial development, rapid expansion and industry reshuffle. During these three periods, China’s e-cigarette industry has been expanding continuously, and the national regulation of e-cigarette has been gradually clarified. The e-cigarette industry has entered the reshuffle stage, and the industry will develop more orderly in the future.
Market size analysis of China’s e-cigarette industry from 2013 to 2021
Data show that the scale of China’s e-cigarette and vape market was 550 million yuan in 2013 and increased to 8.38 billion yuan in 2020, with an average annual compound growth rate of 72.5% for eight years. It is expected to exceed 10 billion yuan in 2021, and the scale of China’s e-cigarette market is expanding rapidly. China has the largest number of smokers in the world, but its e-cigarette penetration rate is only 0.6 percent. The introduction of tobacco control regulations all over the country is also expected to accelerate the increase of penetration rate. Therefore, with the increase of penetration rate of the e-cigarette market in the future, China’s e-cigarette market size is expected to increase substantially.
Analysis of the number of enterprises in China’s e-cigarette industry in February 2021
The vast development space of the Chinese e-cigarette and vape market has attracted many enterprises to enter the game. Statistics show that the number of e-cigarette enterprises in China has grown rapidly from 45,457 in 2013 to 168,452 in 2020. As of February 4, 2021, there were 174,399 existing e-cigarette enterprises in China. In terms of growth rate, the number of e-cigarette enterprises in China is accelerating, and the growth rate will reach 30.27% in 2020, and the momentum of rapid growth will continue. It can be predicted that the number of enterprises in the industry will continue to increase in the future, and the industry track will be more crowded in China.
Jinjia Group among typical upstream companies in China’s e-cigarette industry: profitability
In 2019, Jinjia Group achieved a business income of 3.99 billion yuan, a year-on-year growth of 18.4%, maintaining three consecutive years of accelerated growth; Net profit reached 880 million yuan, up 21 percent year on year. In the first three quarters of 2020, the company achieved revenue of 3.01 billion yuan, an increase of 4.5% compared with the same period of last year, and the business expansion in 2020 slowed down. During this period, the company experienced negative net profit growth, up to 660 million yuan, 1.6% less than a year earlier, the main reason for the decline in performance comes from the outbreak of the epidemic in the first quarter. The comprehensive unfavorable factors caused by the epidemic have caused the company’s various businesses to have varying degrees of stage delays. As the epidemic is effectively controlled in China and the company has achieved good results in the new tobacco industry, the company’s overall operating conditions are in a steady state.
Analysis of driving factors of Chinese e-cigarette consumers in Q1 2021
The main reasons for consumers to choose e-cigarettes are health and environmental protection, such as helping to quit smoking and withdrawal reactions. According to the data, 55 percent, 46 percent and 38 percent of consumers were attracted to e-cigarette products for their ability to reduce nicotine dependence, variety of flavors and reduction of withdrawal reactions. E-cigarette brands tend to highlight the health and environmental benefits of e-cigarettes when promoting their products, and e-cigarette vendors can also highlight the taste and other characteristics of the products to make them a selling point.
China e-cigarette product experience problem perception analysis in Q1 2021
According to the data, short battery life is the biggest concern for e-cigarette users (46.8 percent), followed by continuous high temperature, substandard materials, oil leakage and battery short circuit. It’s believed that the state has not yet defined the nature of e-cigarettes, product positioning is easy to become an obstacle for consumers to use the product. In addition, the development of the industry is still immature, there is no enterprise with outstanding comprehensive strength in the market, there is no brand with good reputation, and consumers lack confidence in product quality assurance.
Distribution of Chinese respondents’ willingness to recommend e-cigarette products in Q1 2021
Data shows that more than half of the interviewed Chinese users believe that e-cigarettes have a smoking cessation effect, and 54.1% of users said that they would recommend e-cigarette products to others, with a high willingness to recommend them. On the whole, the proportion of users who choose to recommend among the interviewed users is relatively consistent with the proportion of users who agree that e-cigarettes have smoking cessation effects, and both are more than half. This shows that smoking cessation effects are the premise for users to recommend products.
RLX Technology: a case study of Chinese e-cigarette enterprises
RLX technology was founded in 2018, is the leading Chinese electronic atomizer company; The company has opened more than 2,500 specialty stores and settled in more than 100,000 retail stores in China. And it opened 8 stores in Canada, Indonesia and other countries, and has customers in more than 40 countries.
Smoore Holdings: a case study of Chinese e-cigarette enterprises
Founded in 2009, Smoore International Holdings Limited is a global leader in providing atomization technology solutions. The company is now the world’s largest manufacturer of electronic atomizing equipment, according to Frost Sullivan’s 2019 report. In 2015, the company launched its own brand Vaporesso in the US and expanded the market to Europe and Japan. In 2016, the company launched its first-generation ceramic heating technology and applied it to its brand Feelm.
Intre Tech: a case study of Chinese e-cigarette enterprises
Based on independent innovation of UDM model (also known as ODM intelligent manufacturing model), Intre Tech mainly provides customers with intelligent control components, innovative consumer electronics and other products research and development, production, as well as intelligent manufacturing solutions for small and medium-sized enterprises. The company is also a Tier 2 supplier to HNB e-cigarette giant IQOS, mainly providing plastic components such as charging boxes (MU) and heating rods (TSH), as well as assembly components for IQOS Tier 1 suppliers Venture and Flex.
Development trend analysis 1: industry supervision policy is becoming stricter
In November 2019, China’s national authorities began to tighten controls on e-cigarettes. The ban on online sales of e-cigarettes led to the removal of e-cigarette products from major e-commerce platforms overnight. Before the online sales channels were cut off, e-cigarette brands shipped through online channels, which could avoid profit sharing between stores and distributors and reduce product costs. Therefore, under the influence of the ban, e-cigarette enterprises can no longer carry out online marketing, and the publicity effect is greatly reduced. At the same time, the introduction of standards in various places has brought a fierce reshuffle of e-cigarette.
Development trend analysis 2: Overseas expansion of Chinese e-cigarette companies
As regulation of online sales has increased, some Chinese e-cigarette companies have begun to expand overseas. On Dec 5, 2019, Chinese e-cigarette brand Doo and e-cigarette distributor Indigo, a subsidiary of US conglomerate Kali Group, said they would set up a joint venture in the US. In the same year, Relx also began to go to sea and achieved good performance in a short period of time. For e-cigarette companies, going overseas is a good strategy to avoid policy risks, but they will also face different regulatory policies, cultural differences, environment, and youth addiction. Therefore, these Chinese companies need to carefully study the differences between the domestic market and overseas markets, positioning the brand strategy accurately, laying a solid foundation for the future global market layout.
Source: 21st Century Business Herald