Beginning in 2019, a number of e-cigarette brands emerged in the domestic spurt, and there were many well-known traffic IPs and top VCs among the entrants. They tried to “kill a bloody road” in the “savagely growing” domestic e-cigarette industry.
Editor’s note: This article is from Daily Economic News, author Liu Ling, editor Wei Guanhong.
At the end of 2018, the global e-cigarette boss JUUL issued a total of $2 billion in year-end awards to 1,500 employees. The $1.3 million annual year-end award makes JUUL a fast-paced social platform in China. At that time, the outside world realized that the original e-cigarette was so profitable.
So, starting in 2019, a number of e-cigarette brands have emerged in the domestic spurt, and there are many well-known traffic IPs and top VCs among them. They are trying to create a China in the “savagely growing” domestic e-cigarette industry. The version of JUUL. In the eyes of those who entered the game later, China is the production base of e-cigarettes, and the industrial chain is complete. Creating a “JUUL” is just a question of marketing and burning money.
However, some newcomers who are trying to “kill a bloody road” seem to be beginning to replicate JUUL’s “successful” brand marketing strategy and move towards a younger development path. At the end of August this year, Ono e-cigarette spent 10 million yuan to invite Edison Chen to endorse, and played the cool slogan “Don’t be so wild, Ono is good”. Recently, the “Daily Economic News” reporter visited a number of electronic cigarette shops in Shenzhen Huaqiang North, each store has displayed one or two hundred electronic cigarettes, not only fashionable, but also varied in taste.
Shenzhen Huaqiang North’s e-cigarette shop displays hundreds of e-cigarettes. Source: Every reporter Liu Ling photo
“This is one of my biggest concerns.” Liao Wenke, vice president of the China Controlled Smoking Association, said in an interview that many e-cigarette brands are targeting the young market and launching cool designs and flavors. Even celebrity endorsements, such brand propaganda will certainly temptation for young people in the country, so that more young people can absorb e-cigarettes, and thus may transition from e-cigarettes to traditional cigarettes.
Advertising “carnival”
In 2015, the first scientist of JUUL, Xing Chenyue, invented an innovative formula for e-cigarettes -Nicotine salt. Unlike the free base nicotine in traditional e-cigarettes, JUUL is the first to adjust the raw materials to liquid nicotine with nicotine salt as the core material. The added benzoic acid makes the e-cigarette taste smoother and less stinging, and can provide users with A similar experience with traditional cigarettes.
In addition to the innovative formula, JUUL has also designed the product into a scientific U disk shape, developed a variety of flavors such as Virginia tobacco and mango, completely changing the “ecology” of traditional e-cigarettes. On the occasion of bringing new products to market, JUUL launched a cool poster, a young female model wearing a white T-shirt, a gray baseball uniform, a high ponytail, and a U-shaped UU-shaped electronic cigarette. With smoke, punk fan is full. In addition, JUUL distributes e-cigarettes free of charge during activities such as music festivals, and promotes marketing on social media such as Instagram.
Technical design, a variety of tastes, and cool publicity… JUUL e-cigarettes quickly became popular on social media such as Instagram. In 2016, sales of JUUL e-cigarettes achieved a staggering 700% increase. Since then, JUUL e-cigarettes have occupied 30% of the US market share since the end of 2017, and have rapidly expanded to 70% market share in October 2018. Financing and valuation have also soared.
At the end of 2018, the world’s largest tobacco company, Altria Altria (with Marlboro and other brands) bought a 35% stake in JUUL for $12.8 billion, pushing JUUL’s valuation to $38 billion. Subsequently, there was news of “JUUL’s $1.3 million annual year-end award.”
JUUL’s family history not only redefines e-cigarettes, but also drives a new round of e-cigarette “entrepreneurship” and investment boom. From the brand to the capital to enter the market, trying to win the biggest dividend in the e-cigar industry that has been “savagely growing” for a long time. According to incomplete statistics, in the first half of 2019, there were more than 35 investment cases in the domestic e-cigar industry. From the statistics of the disclosed investment, the total investment is at least 1 billion yuan.
However, some newcomers who are trying to “kill a bloody road” in the e-cigar industry seem to have begun to replicate JUUL’s “successful” brand marketing strategy and move towards a younger development path.
In April 2019, Luo Yonghao disclosed on Weibo his electronic cigarette brand, Ono E-cigarette, co-founded with former hammer executive Peng Jinzhou. As the top traffic IP of the Internet industry, the addition of Luo Yonghao has made Ono a focus. Three months later (July), there were media reports that the Ono e-cigarette had completed about 30 million yuan in financing.
Ono E-cigarette Image Source: Every reporter Liu Ling photo
Although the development of domestic e-cigarettes is still in the early stage, RELX Yueyin, MOTI Magic Flute, FLOW Fulu and other brands have occupied a certain market share and accumulated a group of users. In order to quickly open up the market, at the end of August this year, Ono E-cigarette hired Edison Chen as the brand spokesperson and launched a brand advertisement with a duration of 1 minute. In the video, Edison Chen switched a number of scenes and stylings and uttered the slogan “Don’t be so wild, Ono is good.”
As the co-founder of Ono E-cigarette, Luo Yonghao quickly reprinted this ad microblog and put it to the top. Edison Chen’s Weibo also released an advertisement, saying that he will serve as the invitation creative officer of Ono. As a result, Ono E-cigarette became the first brand in China to invite stars to participate in e-cigarette projects.
“It must be said that Luo Yonghao is a marketing expert, Edison Chen with controversial topics, combined with controversial e-cigarettes, online public opinion has pushed the brand of ‘Ono’ into public view within a few days, and domestic The popularity of many e-cigarette brands is only among the smoking groups,” an e-cigarette enthusiast told the Daily Economic News reporter.
Incoming is only to “make quick money”?
Shenzhen is the production base of e-cigarettes, accounting for 90% of global production. In 2019, e-cigarettes turned red again, which was unexpected for many e-cigarette practitioners.
In fact, as early as 2013 to 2015, the e-cigarette industry experienced a period of prosperity. At that time, it was basically made money by doing e-cigarettes.” In the e-cigarette industry, I have owned an e-cigarette factory for many years. Li Cheng (a pseudonym) told the reporter of “Daily Economic News”.
According to Li Cheng, the electronic cigarettes on the market are mainly divided into two categories, one is the heating non-burning electronic cigarette represented by Japan IQOS, and the other is the electronic cigarette smoke electronic cigarette represented by JUUL. IQOS’s “river status” is not inferior to JUUL. In 2018, it created more than $4 billion in revenue for Philip Morris International, and Philip Morris International was the predecessor of Altria, the acquirer of JUUL’s 35% stake.
Xing Chenyue told the Daily Economic News reporter that “IQOS’s principle is to heat natural tobacco at a relatively low temperature, which can be ignited without an open flame to evaporate the nicotine contained in the liquid.” The use of natural tobacco can greatly reduce the taste of cigarettes. Although it still contains tar and other ingredients, it can greatly reduce the harmful substances produced by burning cigarettes. This is the reason why IQOS is very popular.
IQOS e-cigarette image source: every reporter Liu Ling photo
IQOS is “surging” in many countries. When it comes to China, it is directly defeated. As early as the 1990s, China promulgated the “Tobacco Monopoly Law of the People’s Republic of China” and the “Regulations on the Implementation of the Tobacco Monopoly Law”, and established the national tobacco monopoly system at the legal level.
Li Cheng told reporters that because the IQOS cartridge contains natural tobacco, Huaqiang North and Shajing have arrested several merchants selling IQOS cartridges this year. At present, the electronic cigarette shops in Huaqiangbei Electronics Market only trade in cigarettes and electronic cigarettes. Although the profits of IQOS cartridges are quite abundant, the “frightened” electronic cigarette merchants can only sell and sell the consoles at most.
The failure of heating and not burning electronic cigarettes has made China a world of smoke and oil electronic cigarettes. Whether it is the highest share of the domestic e-cigarette market, or the later, the magic flute, Fulu, Ono, etc., are all smoke and oil electronic cigarette products. Since there have been hundreds of cases of lung diseases related to e-cigarettes, since the beginning of September, many states in the United States have successively announced stricter control over e-cigarettes, and JUUL has been in dispute for a time.
In addition, China’s e-cigarette national standards may also be released in October this year, which makes the e-cigarette market bear many uncertainties. But in the face of worrying prospects, top venture capital and Internet amnesty are still vying for the first time. “You should not blindly ask about the impact of future policies on e-cigarettes. They are entering to make quick money.” Chen Yong (pseudonym), owner of Huaqiang North e-cigarette shop, said.
Shenzhen Huaqiang North’s e-cigarette shop Photo source: Every reporter Liu Ling photo
How much money does e-cigarette make? Li Cheng showed a reporter’s e-cigarette quotation form to the reporter of “Daily Economic News”. The price fluctuated between 20 yuan and 80 yuan. “The profit of electronic cigarette is very big. I have a customer. I have purchased more than 40 yuan on our side. Selling about $60 in Amazon, selling one is a few times the profit.”
A provincial agent Li Yi (a pseudonym) of Ono E-cigarette revealed to reporters that Ono’s electronic cigarette product with a price of 298 yuan, the price of the goods is 130 yuan, and the manufacturing cost is much lower.At the beginning of this year, Li Yi paid a deposit of several hundred thousand yuan to become the provincial agent of Ono. The KPI of each month is to take two or three million yuan, and the commission commission of Ono to the agent is 7-8. percentage point.
Li Yi told reporters that Ono asked Chen Guanxi to be a brand spokesperson who spent more than 10 million yuan, but the results were good. After Chen Guanxi’s endorsement came out, the thresholds for authorization and agency increased rapidly. “Before, as long as you get 20,000 yuan, you can authorize the sale of Ono products on Taobao. Now you have to get at least 100,000 to 120,000 yuan to get authorization, and Get the price of goods is high.”
The e-cigarette industry chain is very complete, it can be produced by all OEMs. The scale of burning money is small, so how much do you calculate how much they can earn in a month? No one can predict the future policy. Those who enter the market The brand just makes quick money, earns enough, and the industry can’t do it, and it will immediately withdraw.” Chen Yong, who has experienced the ebb and flow of the e-cigarette industry, seems to have already had an insight into everything.
Targeted “Young People”
Recently, “Daily Economic News” reporter visited a number of electronic cigarette shops in Huaqiang North. Each store has one or two hundred electronic cigarettes displayed. The styles are very fashionable. There are luxury car keys and U models. Guitars, violins, etc., the taste is also varied.
Style-rich e-cigarette image source: Every reporter Liu Ling photo
“E-cigarettes are all young people pumping, middle-aged and elderly people generally do not smoke electronic cigarettes, and their ability to accept e-cigarettes is not enough.” Liu Fang (a pseudonym), the owner of e-cigarette shop, put a new label on the cigarette oil. Said, “In order to cater to the preferences of young people, the current electronic cigarette design is more fashionable.”
The opinions of other shop owners are similar to those of Liu Fang, who are more accepting of e-cigarettes. It is worth noting that they also mentioned that “young people” do not include minors, and it is impossible to know whether they are sold to minors at the retail end of e-cigarettes.
The reporter browsed the Tmall flagship stores of several e-cigarette brands and found that many e-cigarette brands did not fully disclose the harmful components in their products, and reminded users of the hidden dangers caused by smoking. Take Yueteng as an example, the slogan is “Let’s go for a moment, and it’s easy to get a moment.” The product’s details page reads: Neutral, gentle and addictive; it reduces the burning of more than 40 carcinogens, such as Carbon monoxide, heavy metals, tar, etc. The hazards of e-cigarettes are not mentioned.
Easy-smoke e-cigarettes sold by e-cigarettes. Source: Every reporter Liu Ling photo
Liao Wenke told the reporter of “Daily Economic News” that many e-cigarette brands are mainly targeting young people’s market, launching cool design and various tastes, and even asking for celebrity endorsements. Such brand promotion methods will definitely be domestic. Adolescents are tempted to allow more young people to smoke e-cigarettes, which in turn may transition from e-cigarettes to traditional cigarettes.
Because China’s e-cigarette penetration rate is not high, there is no incident of e-cigarette-induced illness. In the United States where e-cigarettes are more common, respiratory diseases caused by suspected e-cigarettes are endless, and most of the patients are young.
The US Centers for Disease Control and Prevention (CDC) official website released data showing that as of October 1, 2019, 48 states and the US Virgin Islands have reported 1080 related cases of lung injury to the CDC, including 15 states. A total of 18 people died. All patients reported a history of using e-cigarette products, and most patients reported a history of using tetrahydrocannabinol (THC) products. Recent findings indicate that products containing THC may be an important cause of illness.
Approximately 70% of patients with statistical data are male; approximately 80% of patients are under 35 years of age, 16% of whom are under 18 years of age, and 21% are 18 to 20 years old. The US Federal Trade Commission (FTC) and the chief inspectors of several states have also begun to investigate JUUL’s marketing methods to determine whether they intend to target minors during the promotion.
Today, almost all of the smoke and oil e-cigarettes on the market use nicotine salts invented by JUUL. There are different opinions about the harm of nicotine salt. Dr. Shuhart, deputy director of the US Centers for Disease Control and Prevention, said doctors believe that nicotine salts can cause nicotine to cross the blood-brain barrier and affect the brains of adolescents.
Xing Chenyue believes that e-cigarettes containing nicotine salts can reduce the intake of carcinogens. “In terms of academics, everyone’s views are the same. E-cigarettes will produce less toxic carcinogens such as tobacco tar, carbon monoxide and aldehydes than real cigarettes, which can reduce the intake of unnecessary carcinogens by smokers.” Xing Chenyue said, but It can’t be said in publicity that it is a completely harmless thing.
“To clearly inform consumers that e-cigarettes are at least an addictive substance, companies must properly guide in propaganda, rather than deliberately conceal the facts for sales.” Chen Yu, CEO of Xiwu said. “More or less harm to the body, the threshold of e-cigarette is very low, 3000 can be foundry, smoke oil qualityThe amount is different, and the electronic cigarettes of different tastes are also transferred from the essence. “An e-cigarette industry person told the “Daily Economic News” reporter.
Today, Xing Chenyue has left the company from JUUL, and has created “Xiwu” e-cigarettes in China. Considering the danger that e-cigarettes may cause to young people, Xiwu will position itself as the “most cool” product, with mature smokers as potential consumers. In Chen Min’s view, controlling the quality of cigarette oil is a problem of market regulation and supervision. However, the problem of minors needs to be regulated from the brand side, producer side, channel, sales and so on. Eliminate opportunities for minors to access and purchase such products.
“I am also calling for it to strengthen the supervision of e-cigarettes, speed up research, and propose countermeasures in this regard as soon as possible.” Liao Wenke said.