From 2015 to 2018, many domestic vape projects have successively obtained financing, including RELX, which received 38 million yuan in angel round financing after its establishment in 2018. In the first year of its establishment, RELX’s revenue reached 133 million yuan, and it became profitable in the second year.
Inspired by successful precedents, the enthusiasm for this new track was completely ignited. In the first three months of 2019, there were as many as 248 new vape companies. The participation of many Internet celebrities has attracted unprecedented attention to the vape industry. We welcome celebrities from various industries to create their own vape brands.
The resurgence of the vape industry in China is not a follow-up to Chicken Blood. Although the vape market has been more concentrated overseas in the past few years, the vape and e-liquid manufacturers behind these overseas companies are basically from China, especially Shenzhen Baoan. Statistics show that more than 90% of the world's vapes are produced, assembled and exported here, making it a veritable "world vape factory".
What's more, Cui Yimu, a local company in Shenzhen, has mastered the core technology of vape and the atomizer of vape in the smoke bomb. As a leader in patent barriers, Cui Yimu has a market share of 16.5% in 2019, ranking first in the world, with a net profit rate of 30%. Some people in the industry even came to the conclusion that "only 5 million yuan can open a vape brand in China". With a well-developed supply chain, advantages in core technology, and the most important 300 million smokers, it is only a matter of time before China is born. For a steady stream of entrants, the most intuitive attraction is undoubtedly the low cost and high return of this industry.
A long time ago, the media conducted a survey. The cost of the RELX rechargeable vape kit with the "one shot, two bombs" configuration is only 70 yuan, but the terminal price can reach 299 yuan. The cost price of a box of three ceramic atomizing core cigarettes is 30 yuan, and the retail price is 99 yuan, which has more than tripled. Between the throughput, how much profit can easily enter the pockets of merchants. With huge profits, everyone, whether investors or manufacturers, wants a piece of the pie. Especially for such small-scale enterprises, they are more willing to join this market that is particularly friendly to small players. "Focused participation" often hides opportunities to get rich.
At the beginning of 2019, when the vape industry is booming, many people in the industry have predicted the bright future of vape. However, on November 1 of that year, a "Notice on Further Protecting Minors from Vape Infringement" was issued, explicitly prohibiting the sale of vape through online channels. The ban has contributed to the reshuffle of the industry and the suppression of policies, and has also accelerated the birth of industry giants to a certain extent.
For the fledgling vape business, the online ban is undoubtedly a fatal blow. Many offline channels are weak, small brands that mainly rely on e-commerce for profit have closed down, and the strength of the remaining survivors has been greatly weakened, so they can only turn to offline channels to start a new round of fierce staking.
But for RELX, the industry leader, the threatened ban has turned into an opportunity. In RELX's overall revenue in 2018, offline distribution channels accounted for as high as 60.2%. Offline was originally RELX's strength. After the "disconnection", small brands lacking financial support cannot join the competition in offline channels at all, and RELX relies on strong capital support to vigorously deploy offline and further expand its advantages on the original basis.
In response to the new vape regulations, RELX has issued a statement in response: firmly supports and implements the online ban on vape, and RELX does not serve minors. Therefore, after experiencing the decline in performance caused by the impact of the epidemic in the first quarter of 2020, RELX’s revenue recovered in the second quarter and exceeded 1 billion yuan in the third quarter, with offline channel sales accounting for 98.2% and more than 4,000 stores .
On the surface, under the ban of "disconnecting from the Internet", the big brands represented by RELX seem to have successfully blazed a trail and become the biggest winners. However, against the backdrop of increasingly stringent domestic and foreign policies, the outlook for the vape industry remains cloudy. Following the notice of the online ban, Shenzhen, Beijing and other cities issued documents again to strengthen the supervision of the vape market; in early 2020, the United States once again tightened the control of vape sales for the protection of minors. At the same time, it stipulates that new tobacco products can only be legally sold in the United States through the Premarket Tobacco Application (PMTA). At present, only three companies in the world have passed the PMTA certification. The domestic core technology of fiber optic gyroscopes began to apply for the PMTA project in September last year, and has not received a reply so far.
Trump has tweeted that he prefers to vape but needs to make sure the product is safe, calling for "Keep our kids off vape!". It can be seen that although different countries still have different definitions of vape, as long as its ambiguity on health issues exists objectively, it is destined to accept "strong supervision". According to statistics, in the past year, the number of active national vape brands has decreased by 90%, leaving only big brands fiercely competing for the remaining sites in the game with the policy. In the ever-shrinking policy space, how long can vape "burn"? While no one can make accurate predictions, I'm afraid most people can't be as confident as they were two years ago.
The game of opportunity and risk: vape enters the fog. Compared with the controversy over its health impact, the policy pressure facing vape also comes from its inevitable "fate gate" - the impact on the traditional tobacco industry market. Whenever the topic of smoking ban is mentioned, old smokers always take out their books to show their great "contributions" to society.
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