E-Cigarettes No Threat to China's Traditional Markets - Yet
The emergence of electronic cigarettes as a substitute for traditional cigarettes in China may have a great impact on the country’s traditional markets, even as the safety of vaping remains controversial in China and the rest of the world.
By TobaccoChina Online
In Europe, the use of electronic cigarettes among smokers rose from 7.2% to 11.6% in a period of just two years from 2012 to 2014. In Britain alone, more than 2.5 million people used e-cigarettes in that period, with sales roughly reaching a high of US$2 billion. Results of a recent survey indicate that in the United States – the largest e-cigarette market in the world –sales reached US$1 billion and the sales of e-cigarette parts amounted to $1.5 billion in 2014. In 2015, these two figures respectively grew to $1.4 billion and $1.9 billion.
The global e-cigarette scale reached $6 billion in 2015. The latest data released by cspnet.com indicate that annual sales in the US alone will grow by $20.17 billion by 2025, with the annual compound growth rate from 2015 to 2025 reaching 22.5%, and the expectation they will overtake the traditional cigarette market sales in the next 10 years.
Emergence of e-cigarettes in China
There are more than 300 million cigarette smokers in China, accounting for one-third of the world’s total. Meanwhile, China is where e-cigarettes were invented, and it is the world’s largest e-cig producer and exporter. China is in control of almost all core technology in this segment and produces 95% of the world supply. Therefore, in this era of prosperous upward, China has the greatest development potential this segment.
However, despite its lead in manufacturing e-cigarettes, China has not formed influential brands nor developed a mainstream consumer group.
Presently, the market consists of two parts – firstly, young people in pursuit of fashion; and secondly, middle-aged people who wish to give up traditional smoking. For the younger segment, the bulk of e-cigarettes consumption is not very brand loyal.
Last October, the 4th China International Electronic Cigarette Expo was held in Beijing, where the visitors were mostly young people. The more novel a product was, the greater the interest. An exhibitor named Mod Fuel said that the buyers of its products were almost 100% young people. For a handsome person always trying to make himself stand out, it is quite normal to hold a traditional cigarette playing it cool at a night entertainment venue, but it would be unusual to use e-cigarettes there that no one had heard of.
Although e-cigarette shops are emerging in China in a low-profile manner, the positioning of their products is not limited to “abstention of smoking”, but more reflects tastes, fashion, and luxury. Operators of these shops are mostly young people and many of them incorporate Vaping as a lifestyle choice.
A leader of Kingsong – a Chinese electronic cigarette manufacturer – said, “Some manufacturers are only eager for quick success and instant benefits, and would blindly transplant approaches from overseas markets and duplicate them onto the domestic markets instead of seriously considering the actual demand of local consumers, and would not consider such factors as the purchasing power, the demand for use, the environment for use, the psychological appeal, etc. They have actually led the domestic electronic cigarette markets into a consumption blind zone in the style of entertainment markets.”
Holding a similar point of view, board of directors chairman Liu Qiuming of Huizhou Kimree Technology – which became involved in e-cigarettes in 2006 – told TobaccoChina Online: “In reality, a considerable number of people should not have been our leading customers. If consumers of electronic cigarettes are merely a group of game players or ‘new human beings’ playing cool, such a situation, I think, would be disadvantageous to the long-term development of the tobacco industry of China.”
In other countries, a large number of people believe that electronic cigarettes are a substitute for traditional tobacco products. But in China, the people’s understanding of e-cigarettes seems to be quite different.
Controversy about safety of e-cigs
A report on tobacco prevalence in Suzhou City in 2015 indicates that 47.6% of the respondents had heard of electronic cigarettes; but only 1.6% used them; and 81.8% did not believe that they were much less harmful than traditional cigarettes.
Visiting an e-cigarette experience store, a reporter with TobaccoChina Online randomly picked up a bottle of e-liquid and the contents were nicotine at 6mg/30ml or 3mg/30ml, which is equivalent to 0.2 mg or 0.1 mg per milliliter. A 30ml bottle of tobacco e-liquid lasts for about one week on average and comes in tea, mint, fruit, cake, tobacco, and other flavors.
Then, the question arises: are e-liquids injurious to health? And do doctors understand the smoking cessation claims that manufacturers of e-cigarettes make?
TobaccoChina Online discovered that doctors at the several major hospitals in Suzhou City generally do not know much about e-cigarettes and that there are some doctors who have reservations about the alleged smoking cessation function. “The existing clinical guide to smoking cessation does not recommend electronic cigarettes as a means of smoking abstention,” said one doctor there.
“Therefore, my smoking cessation clinic never proposes that smokers use electronic cigarettes instead.” She said that she has never heard of anyone successful in giving up smoking by means of using electronic cigarettes. Another doctor with the hospital pointed out that most e-liquids contain nicotine, and therefore may be addictive, and that nicotine is one of the “known harmful substances” from cigarette smoking. The effects of inhalation are now yet known.
Chinese e-cigarette companies exported nearly 300 million units to Europe and the US, but their sales to the domestic market account for less than 10% of that. Kimree’s Liu said, “Over 90% of our sales go to markets abroad, and our domestic market sales only account for some 5% of the total. And, as far as I know, such is also the case for other electronic cigarette manufacturers in China.”
In 2015, there were more than 800 e-cigarette companies in China. By the end of October, there were few more than 300 left, and this figure will keep falling. A major cause for this decline is the negative impact of domestic economic development. After the implementation of the relevant regulations by the US Food and Drug Administration and the Tobacco Product Directive by the European Union, all electronic cigarette products for export to the US and the European Union must be in compliance with the new requirements for market access there. Only after winning the relevant certification can they be permitted to enter the marketplace. Small makers without the required qualification, are closing out. Meanwhile, large manufacturers with technological and funding advantages, now enjoy favorable opportunities for rapid business development, and can use their advantages to take greater market share.
The development of e-cigarettes in China is still in an initial stage, and there is a lack of comprehensive understanding and recognition of the product by consumers. Moreover, present users are neither ideal smokers nor the mainstream part of the population. Therefore, development of this segment will only cast a slight impact on the traditional tobacco industry. Yet, the development of any matter will follow a progressive course, and anything new will be an evolution from what is non-mainstream to what is mainstream. Only when social elites and white collar people in China generally accept e-cigarettes will the traditional tobacco industry realistically feel a threat. Therefore, at least in the next two to three years, electronic cigarettes will not generate substantial impact.