The compulsory national standard of Electronic Tobacco is in the process of drafting. The relevant technical indicators and contents are still under study, and the time for approval and publication is uncertain. Competition in the domestic electronic tobacco industry has developed to the capital level. The electronic cigarette industry has a vast market in China - China has 350 million smokers, accounting for nearly 30% of the total number of global smokers, but less than 1% of the total consumption of electronic cigarettes; in contrast, in the United States, which has the most developed electronic cigarette market, electronic cigarette consumers account for 13% of the total smokers.
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Faced with electronic cigarettes, capital and entrepreneurs poured in crazily, and the public followed the trend and criticized and worried.
Following the bicycle chaos, the domestic venture capital circle has entered the smoke war since 2018. However, looking closely at the surface hot marketing of e-cigarette entrepreneurs and layout investors, in fact, they are extremely nervous about policies, regulations and the actions of relevant departments, trying to circle more territory and dividends as far as possible before the lifeline of supervision falls.
Although this market space is large enough, the stage of brutal growth of domestic e-tobacco entrepreneurs will soon end with the introduction of relevant regulatory policies.
Recently, the National Standardization Administration Committee responded to the first financial statement that the compulsory national standard for electronic tobacco is in the process of drafting, the relevant technical indicators and contents are still under study, and the time for approval and publication has not yet been decided.
According to the official website of the National Standardization Management Committee, the national standard formulation plan for e-cigarettes issued in October 2017 has to go through several stages: online publicity, drafting, soliciting opinions, review, approval and publication. At present, the project status has entered the stage of approval in progress. According to the standard formulation cycle, it will be approved and approved by the National Standardization Committee within 24 months and 12 months. Cloth, there are about four months left for the formal end of the project. At that time, the production and circulation of electronic cigarettes in China will be carried out according to the requirements of national standards.
Competition in the domestic electronic tobacco industry has developed to the capital level. Since the second half of 2018, electronic cigarettes have entered the peak period of financing, with 11 financing incidents occurring, excluding JUULs $650 million and $128 billion in high-volume financing, and other brandsfinancing scale is approaching 500 million yuan. By the end of May, 11 financing incidents had happened. The total amount of financing was nearly 900 million yuan. Many of them were new brands in 2019. They were founded in Shenzhen. The financing was concentrated on angel wheel and A wheel, which were in the early stage. Behind this round of electronic cigarette tuyeres, there are a number of frontline investment institutions, including Sequoia Capital, IDG, True Fund, Source Capital and so on.
Besides the primary market, the secondary market is also keen on the concept of electronic cigarettes. The main companies engaged in electronic cigarette business in China include Interest Technology (002925.SZ), Tianchang Group (02182.HK), Shunhao Share (002565.SZ), Jinjia Share (002191.SZ) and other A-share and Hong Kong-share listed companies. After the 3.15 report, electronic cigarette conceptual stocks showed different degrees of decline, but soon there was a rebound, and even showed a continuous rise and fall. According to the earnings report, the business revenue and net profit of Evipps and Mcwells e-cigarette business increased substantially between 2015 and 2018, while the two companies stopped listing on the new third board one after another. The industry speculated that they might switch to the A-share market.
On the brand platform, the first domestic electronic cigarette to enter the industry, and the largest scale of electronic cigarettes at present, is created by Wang Ying, former head of Uber China and general manager of drip Uber business. In June 2018, Yuejie announced the completion of the first round of 38 million yuan financing, led by source code capital, followed by IDG investment. In March this year, Yuejie announced a new round of financing, valued at $800 million.
Zhang Jinyuan, CEO of Tongdao Uncle, believes that Yuejie knows the basic method of electronic cigarette market genetically. Its channel advantage is based on brand advantage, but its scale has not reached the level of natural monopoly.
Therefore, after Yueyi first opened the gap in the domestic electronic cigarette industry, a large number of followers poured in. After all, industry competition is essentially human competition, and a major feature of the domestic e-cigarette industry is the influx of many entrepreneurs with IP traffic, including Luo Yonghao, the founder of Hammer Technology, Zhu Xiaomu, Zhang Jinyuan, Cai Yuedong, the founder of Tongdao Uncle, and Hechang, the founder of Huang Taiji.
Does electronic cigarette make a big profit?
The founder of NetRed will only bring its own flow and resources, and will not easily create core barriers. At present, practitioners mainly focus on brand, channel, supply chain, marketing and other aspects of competition. Therefore, the current so-called profiteering in the electronic cigarette industry is also not right.
Right is because the cost of electronic cigarettes is really low. According to the data provided by many practitioners, the cost of cigarette bombs does not exceed ten yuan. Hardware equipment can be divided into one-off and replaceable cigarette bombs. The former is about ten yuan, while the latter is between twenty and thirty yuan. The combined cost price is not high. For products selling at 199 yuan, 299 yuan, or even 399 yuan, the profit margin is very good. Big.
According to an insider, the price of electronic cigarettes on the market is about 230 yuan, and the factorys shipment price is 40-50 yuan. Mold, scheme, material and labor are the main cost components. The factorys profit is about 30%. Brand merchants give channel merchants 100 to 130 yuan at a price of 40% to 60% of gross profit, but the ultimate profit of brand merchants depends on the proportion of marketing, operation and other expenses. The terminal selling price of channel merchants is around 230 yuan, which has become the biggest profit earner. According to the earnings reports of Avivus, Mcwell and other companies, the gross and net interest rates of electronic cigarettes are about 30%.
But Weilu, co-founder of iLAX, said that the initial marketing cost of the electronic cigarette industry is bound to be the highest at different stages of the cost structure, which will gradually decrease in the future and increase the cost of R&D. At present, electronic cigarettes mainly focus on two aspects: on the one hand, the establishment of features from the tobacco pole, focusing on the appearance design; on the other hand, it will enrich the taste of high-end fume.
Zhu Xiaomu, founder of FLOW, believes that most electronic cigarette manufacturers are not profitable at present, and the main cost is spent on marketing. Take FLOW as an example, its marketing mode mainly adopts the form of cooperation with offline activities, such as IMF electronic syllables and strawberry music festivals. The price of a booth in the Strawberry Music Festival ranges from 300,000 yuan to 500,000 yuan, and the overall cost of FLOWs participation is about 1 million yuan.
In addition, a direct impact of 3.15 is that the mainstream advertising platforms such as elevators and television no longer receive e-cigarette advertisements, which makes the platform look for other offline channels. At present, e-cigarette sales channels include e-cigarette stores, 3C digital stores, comprehensive supermarkets, convenience couples stores and other forms of dealers, as well as part of the lottery activities, KOL publicity, etc., will be divided into a large part. Divide profits. As a result, electronic cigarettes are not a lucrative industry with high gross profit.
In addition to the supply chain, fume is the main factor of electronic cigarettes. Zhang Jinyuan revealed that the supply of fume oil has begun to be tight, and is communicating with the Chinese Tobacco Bureau, hoping to cooperate.
Hidden danger of horse race enclosure
The electronic cigarette industry has a vast market in China - China has 350 million smokers, accounting for nearly 30% of the global smokers, but the proportion of electronic cigarette consumption is less than 1%. In contrast, the United States, the most developed electronic cigarette market, electronic cigarette consumers account for 13% of the total smokers, once the domestic electronic cigarette consumer group scale is expanded to 10% or more, it can open up more than 100 billion levels. Market size.
Domestic e-cigarette practitioners have more optimistic expectations for the future of the industry, rather than the unknown risks and the pressure of capital rush to force them to race for the final market opportunity before the end of the dividend period.
But there are risks and crises behind the rapid expansion of electronic cigarettes.
In April this year, the 5th IECIE Shenzhen Electronic Cigarette Exhibition, one of the worlds four largest tobacco exhibitions, opened at the Shenzhen Convention and Exhibition Center. Hundreds of electronic cigarette manufacturers participated in the exhibition, but two-thirds of the products were relatively poor, such as smoke poles made of metal shells, which would produce harmful aluminium oxide after heating.
In addition, the non-OEM, self-controlled supply chain manufacturers are not foolproof, the electronic tobacco industry chain is still in the early stage of immature development, too fast, too fast to launch new products on the market, will directly lead to product quality failures, quality rate decline.
In March this year, Yuejie launched a new Alpha product, but subsequently there were oil spills and other good rate problems, the platform Off-Shelf products, shut down production lines. In the near future, the brand will introduce new products with more fashionable appearance and design. The cigarette bomb or cigarette stick are different from the existing products on the market.
Weilu said that the product will inevitably undergo many polishing processes. Some brands have the need for rapid listing. Without multiple tests, the production cycle will be compressed too short. There will inevitably be matching problems and product quality problems in each link. The complete production of electronic cigarettes will take at least 150 to 180 days.
Risk Warning and Red Line of Supervision
Toxicity and policy are the two lifelines of the development of domestic electronic tobacco industry, even if the broad prospects of the industry are known.
Compared with the exciting entrepreneurs, the whole public opinion holds more vigilant and moral criticism attitude towards domestic electronic cigarettes. The unknown toxicity violation of electronic cigarettes and the accompanying damage to consumershealth are the core criticism points.
Xiong Jingfan, technical officer of Shenzhen Smokeless City Project, said that electronic cigarettes, as a new product in recent years, were not regulated according to tobacco products. In addition, manufacturers can help to give up smoking with electronic cigarettes for wide publicity, misleading the public, making it less aware of the harm of electronic cigarettes. At present, Shenzhen has put electronic cigarettes under the same control as traditional tobacco products. It is proposed to ban the use of electronic cigarettes in all non-smoking places, as well as advertising, promotion and sponsorship of electronic cigarettes. Smokers often choose e-cigarettes as an excuse, but they should be more vigilant about the harmfulness of e-cigarettes to teenagers.
On May 30, China CDC released the results of China Adult Tobacco Survey 2018. The survey found that young people were the main users of e-cigarettes, and the use rate of e-cigarettes was 1.5% in the 15-24 age group. The main access to electronic cigarettes is the Internet (45.4%). It is noteworthy that compared with 2015, the proportion of people who have heard of electronic cigarettes, used electronic cigarettes, and now use electronic cigarettes has increased.
The unknown toxicity of electronic cigarettes is the core concern and panic point of the current society.
According to information released by the World Health Organization, electronic cigarettes usually produce less or far less known toxic substances than cigarette smoke, but produce new harmful substances, such as glyoxal, that are specific to electronic nicotine delivery systems. In addition, some metals (including lead, chromium, nickel) and formaldehyde in aerosols of some electronic cigarette delivery systems have concentrations equal to or higher than those of traditional cigarettes. Medium concentration. In addition, second-hand smoke (second-hand aerosol) of electronic smoke is not safe. It is a new source of air pollution that produces particulate matter, some volatile organic compounds, some heavy metals and nicotine. The World Health Organization directly describes the difference between traditional second-hand smoke and electronic second-hand smoke in terms of whether you want to be hit by a car or a motorcycle.
The main selling point of e-cigarette marketing is that e-cigarettes can help quit smoking, but this has not been recognized so far. The main culprit of tobacco addiction is nicotine. The smoke of electronic cigarettes also contains nicotine. Because of the lack of standards for electronic cigarettes, the content of various substances in the smoke varies greatly, which makes it difficult to assess other health risks.
Besides health, policy is the lifeline of domestic electronic cigarette industry.
From the content of the National Standards Committees reply, it can be preliminarily speculated that the compulsory national standards for electronic cigarette are mainly aimed at the detection of components in electronic cigarette smoke. The technical scope and content of the specific standards are mainly the determination of nicotine, propylene glycol and glycerol in electronic cigarette smoke. The standard has not yet landed. What subversive impact it will have on the electronic cigarette industry is not yet known, but it can be determined. Yes, electronic cigarette manufacturers with substandard quality and safety issues will lose their chances of survival.
Some investors expressed a more negative attitude towards the domestic e-cigarette industry. Wang Jing, Yunjiu Capital Partner, said that the development of the domestic e-cigarette industry was relatively early, but looking ahead, because of policy reasons, we can actually see a clear ceiling. Another investor who did not want to be named cited a detail: the characteristics of foreign tobacco boxes are that they warn smoking is harmful to health on a large scale, and the purpose is to reduce consumersdesire to buy as much as possible. However, the domestic tobacco industry has not followed up in this respect for many years. Generally, it is only a reminder that smoking is harmful to health. The tobacco industry provides trillions of taxes for the country every year. The huge profit and influence space determine that the industry will not change much in the short term. Although 3.15 named electronic cigarettes, the doubts about the effectiveness and safety of electronic cigarettes have not reached the seven inches of the electronic cigarette market. However, as electronic cigarettes increasingly reach the incremental market of young consumers, cheese from traditional tobacco is bound to move. Frequent negative public opinion will also limit the further promotion of e-cigarettes, while accelerating the decline of the policy edge.
At present, there are 32 countries worldwide banning e-cigarettes, and 69 countries have implemented controls on them. Six countries prohibit sales, production and imports and regulate their use. Hangzhou has enacted legislation to prohibit the use of electronic cigarettes in smoking-free places, and some cities are planning to enact relevant legislation, such as Hong Kongs plan to ban electronic cigarettes in an all-round way, and Shenzhens plan to amend laws to prohibit the use of electronic cigarettes in smoking-free places.
Local legislation can not replace national standards and industry norms. It will be the general trend that the national standard of electronic cigarettes will be issued so that the irregular products in the market can be delisted as soon as possible. In July 2018, the national standard of electronic cigarette was voted, and the result showed that the pass rate was 78.18%.
In fact, even if fortunately there is room for survival, the only option left for e-cigarette entrepreneurs is probably to be acquired by state-owned enterprises. Referring to JUUL, a representative foreign company, Altria Group acquired 35% of JUUL Labs Inc for $12.8 billion in December 2018, which directly valued the latter at $38 billion.
It depends on what e-cigarette entrepreneurs want. Zhu Xiaohu, an investor, is also cautious about the e-cigarette project. Regulation will certainly catch up quickly, see the black swan clearly, and understand its regulatory logic, he said.
First Financial Reporter Lu Qian Qiu Zhili
Source: First Financial Responsibility Editor: Yao Liwei_NT6056