Radar financial product article | zhang kai continuous | electronic cigarettes made deep rich myths, is accelerated.The State Tobacco Monopoly Administration (STMA) has issued a draft of national standards for e-cigarettes (the Opinions) and measures for the Management of e-cigarettes (the Measures), further strengthening supervision over the industry.Radar finance learned that the measures will come into effect on May 1, in the eyes of many industry insiders, the implementation of the new rules will bring great challenges to practitioners.As mentioned in the Opinions, the design of atomization should not make the characteristic flavor of products show other flavors except tobacco, which means that the “fruit flavor” and other flavor bombs vigorously promoted by e-cigarette merchants usher in the countdown.And the “measures” mentioned in the “not exclusive operation of e-cigarette products on the market,” may lead to the failure of the “brand stores” that previously played a significant role in product publicity and sales.It is worth mentioning that on January 22, 2021, when Wushun was listed in the US stock market, the founder Wang Ying, who holds 54.3% of the shares, was once worth 162.9 billion yuan, making her the “Richest woman in China” in the Forbes real-time rich list.However, there is some debate about whether Wang Ying ever rose to become China’s richest woman.It is understood that Wang Ying’s 54.3% shareholding also includes the shareholding of her management team, and her actual shareholding is 19.88%.But even so, Ms Wang’s wealth is impressive, especially considering she started her business only three years ago.In the past year more than time, fog core technology market value evaporation more than 90%, Wang Ying’s wealth has also plummeted.According to the Hurun Global Rich List, Wang ying’s wealth has also dropped from 71 billion yuan to 6.3 billion yuan between 2021 and 2022.According to this calculation, Wang Ying’s wealth has shrunk to 64.7 billion yuan.For industry insiders, Ms Wang’s roller-coaster ride of wealth epitomises the bumpy development of the e-cigarette industry.Fogcore technology is the peak of the listing, Wang Ying wealth experience roller coaster behind Wang Ying fogcore technology, is the absolute giant in the Chinese e-cigarette market.In the first nine months of 2020, Fog Core’s Chinese market share by retail sales was as high as 62.6 percent, according to the CIC report.Radar financial comb found that the rapid development of fog core technology, mainly stepped on the tuyere.Juul, an American e-cigarette company, burst onto the scene in 2015 and has seen sales and valuation skyrocket in the three years since.It was valued at a staggering $38 billion at the end of 2018, when it secured a huge investment from tobacco giant Altria Group.For a while, e-cigarettes were seen as a new fad, which shocked practitioners in China because while 90 percent of the world’s e-cigarette products and accessories are produced in China, most of them are exported.And as the arrival of tuyere, numerous Internet entrepreneurs hear the wind and move, fog core technology is set up at this time.With supply chains so similar, many e-cigarette entrepreneurs are focusing on branding.In addition to celebrity spokespersons, they also highlight “healthy” elements in the publicity copy, confusing the concept of “replacing cigarettes”. At the same time, colorful cigarette rods and fruity cigarette bombs also attract teenagers greatly.Fog core technology is also well versed in this way.In June 2018, when obtaining 38 million yuan angel round financing from Source Capital, IDG Capital and Sequoia China, the company’s Yue Ke products already have three flavors of Refreshing mint, classic tobacco and tropical fruit.Team members say they hope to change traditional smoking patterns and accelerate the shift of the billion smokers to healthier, pleasurable forms of smoking.In 2019, Fogwick raised two more rounds of funding, valuing the company at $2.4 billion.At this time, the domestic e-cigarette market is staging a “thousand cigarette war”, physical e-cigarette stores have sprung up in many cities in the streets.But regulation has followed.In August 2018 and November 2019, two circulars were issued to protect minors from e-cigarettes, known in the market as “Internet bans.”Affected by this, e-cigarette related enterprises ushered in a round of shuffling.It is worth mentioning that the fog core technology of forward-looking layout of offline channels has won development opportunities instead.By the end of the third quarter of 2020, the company has 110 authorized dealers, more than 5,000 brand stores, more than 100,000 integrated retail outlets, more than 20 self-owned brand stores, covering more than 250 cities.In January 2021, Fogcore successfully raised $1.39 billion, which was one of the largest IPOS in the world in the first quarter.The next day, Wuxin’s shares hit $35, giving the company a market capitalisation of more than Rmb300bn.Soon after, however, Foggy Core was the subject of a class-action lawsuit filed by securities investors in the United States, who argued that the IPO obscured potential regulatory risks, resulting in huge losses after the purchase.In 2021, Wuxin Technology achieved revenue of 8.521 billion yuan, with a year-on-year growth of 123.08%;The net profit of the parent company was 2.025 billion yuan, up 1680.56% year on year, but the company’s share price fell from 35 dollars all the way to 2.05 dollars now.Regulatory heavy hammer continues to fall a number of industry people believe that the fog core technology shares significantly lower, mainly affected by regulatory.In March 2021, the Ministry of Industry and Information Technology issued a Decision on Revising the Regulations on the Implementation of the Law of the People’s Republic of China on Tobacco Monopoly (Draft for Soliciting Comments), in which article 65 was added that e-cigarettes and other new tobacco products should be implemented in accordance with the relevant provisions on cigarettes in the Regulations.Before that, the tax of e-cigarettes was still based on general consumer goods, and the VALUE-ADDED tax was 13%. Moreover, Yueke also enjoyed a low tax preference of 15% corporate income tax for high-tech enterprises, while the comprehensive tax rate of traditional cigarettes was as high as 60%.Two months later, the National Health Commission released a Report on the Health risks of Smoking in China 2020 in Beijing, stating that “there is sufficient evidence to show that e-cigarettes are unsafe and pose health risks”.From the end of November to the beginning of December 2021, the Ministry of Industry and Information Technology revised the Regulations on the Implementation of the Law on Tobacco Monopoly of the People’s Republic of China and issued the Regulations on the Management of E-cigarettes (Draft).The latter has detailed regulations on taste, nicotine concentration and sales.Coupled with the opinions and Measures released on March 11, 2022, the e-cigarette industry has been hit hard in one year. Even with the outstanding performance of Wexin technology, the capital market cannot stop “voting with their feet”.Among them, e-cigarette promotion and packaging is the focus of regulation.Exhibitions, forums and expos promoting e-cigarette products in various forms are prohibited, according to the regulation.Sales or disguised sales of e-cigarette products through vending machines are prohibited;Sales of flavored e-cigarettes other than tobacco flavor and e-cigarettes that can add their own aerosol will be banned.The guidelines are seen as a reference to the US Food and Drug Administration, which banned the sale of all mint and fruit-flavored vaped e-cigarettes in the US in January 2020.The popularity of e-cigarettes in the younger market has a lot to do with taste and marketing.In addition to the traditional tobacco flavor, e-cigarettes can be developed into “sweet” bombs with flavors such as grape, lemon and Coke by adding ingredients such as fragrance and smoke oil.According to e-cigarette practitioners, it is estimated that more than 70% of the cigarettes sold in the market are flavored.In October 2021, fudan university, institute of health communication control research center released the electronic cigarette marketing and affect adolescent health research report also mentioned, in the teens surveyed, close to half of the junior middle school stage at the age of 13 to 15 first started smoking electronic cigarettes, over the past 30 days of electronic cigarette smoking teenagers used most is fruity taste.Only 43 percent of the 104 official e-cigarette websites analyzed had restrictions on users’ entry age, the report said.Seventy-six percent of e-cigarettes have no health warnings on their websites, which is clearly weak.In addition, the marketing momentum of e-cigarettes on Weibo is very fierce. Pictures and video pictures of most brands’ Weibo accounts highlight the “playability” and “rejuvenation” of e-cigarettes.Taking Yue Ke as an example, Radar finance experience found that the official website will prompt “minors are forbidden to visit this website” when logging in for the first time. However, when users click “over 18 years old, continue to visit”, they can directly access the website without any verification.In addition, yue Ke’s official website greatly weakens the attribute of “smoke” through the concept of “fog”, and emphasizes the shaping of the sense of science and technology.Chen Zhong, an e-cigarette industry watcher, believes tobacco-flavored e-cigarettes currently account for at most 10 percent of sales, or even less.After the regulation is implemented, store revenue will plummet, and more than 80% stores may not be able to continue operating.In addition to appealing to teenagers, the flavor of cigarette bombs is also seen as key to differentiation and recognition for current e-cigarette brands.Citic Securities once mentioned in the research newspaper that the brand of electronic cigarette butts is expected to gradually form a unique user stickiness of taste and taste, creating a natural moat.After the new rules fall, e-cigarette brands may appear convergence.”Enterprises or individuals with tobacco monopoly retail licenses and qualifications for e-cigarette retail business should purchase e-cigarette products from local e-cigarette wholesale enterprises, and should not exclusively operate e-cigarette products on the market,” the regulation said.According to one e-cigarette industry insider, the regulation means existing stores will have to obtain licenses and transform into multi-brand aggregators in the next month or so in order to remain open.Early decoration investment, personnel investment will become sunk costs;The national, provincial and municipal generation of major brands will also face transformation.Industry personage thinks, this will cause a heavy blow to yue Ke.According to the 2021 Blue Book on e-cigarette Industry, there are about 190,000 e-cigarette retail stores in China, including about 47,500 brand stores and 27,600 Yue Ke brand stores, accounting for 58.2 percent of the total market.However, another consensus within the industry is that the smooth landing of “methods”, but also to guide the supporting rules.For example, the Measures states that “sales outlets of e-cigarette products shall not be set up around ordinary primary and secondary schools, special education schools, secondary vocational schools, special schools and kindergartens”, but does not specify the range of “surrounding” meters. In practice, there is a big difference between 50 meters, 100 meters and 200 meters.In addition, the procedures for obtaining licenses for retail stores have not been clarified.Would going to sea be a good choice?Industry insiders believe that China’s e-cigarette industry was mainly overseas before the advent of the tuyere, so when the supervision is strengthened, it has become a common choice for the industry to re-embrace the overseas market.According to the latest statistics of the E-cigarette Industry Committee of the China Electronic Chamber of Commerce, China’s e-cigarette exports reached about 138.3 billion yuan in 2021, seven times the domestic e-cigarette market size (retail sales) of 19.7 billion yuan in the same period.According to the “global e-cigarette market penetration rate by country in 2021” released by IMEDIA Research, the PENETRATION rate of the United States is 38%, and that of Japan is 30.3%.By contrast, domestic market penetration is just 1.5 per cent.E-cigarettes have a broader overseas demand and market.At present, many domestic enterprises have taken the lead in overseas layout.Such as Wuxin technology since 2019 began to explore the international market, in December 2021, at the fifth International E-cigarette Industry Summit forum held in Shenzhen, Yue Ke co-founder, Yue Ke International CEO Du Bing said that at present, Yue Ke International has set up offices and stations in 21 countries and regions;In Southeast Asia, New Zealand and other regions to maintain the lead.In addition, platinum has more than 30,000 retail selling points in the US by the end of 2021.As early as September 2020, Platinum submitted the application for PMTA of hardware and fume oil to THE US FDA, becoming the only Chinese e-cigarette enterprise to submit the application for PMTA of fume oil.But gaining a foothold overseas is not easy.At present, the way for domestic e-cigarette brands to go overseas is still mainly contract manufacturing, but in order to truly “go global”, brands not only need to adapt to different regulatory policies, but also need to solve cultural differences, local competition and other issues.The operator of an e-cigarette foundry in Shenzhen said in an interview that many of the marketing methods and products that work in China may not work overseas.Take e-cigarette bombs, for example, which are popular among consumers in China but not overseas.Nicotine levels vary from country to country, with the United States allowing no more than 5 percent and the United Kingdom limiting nicotine levels to 2 percent.The United States, which accounts for 57% of the global e-cigarette consumption market, has a highly concentrated market share.According to Nielsen channel statistics, Juul, Vuse and NJoy occupied the top three e-cigarette market shares in the United States in the month ending May 3, 2021, with a combined market share of 91.7%. Combined with blueCigs, CR4 topped 95%.But a number of industry insiders believe that no matter how difficult it is, e-cigarette enterprises still want to go on.After all, the era of barbaric wealth creation is over. The future is a competition between companies’ ability to adjust and their technological prowess.