“E-cigarette factory?” The largest factory nearby heard that it was closing, and a lot of people had been laid off lately. A Chen, a driver who was driving in the Shajing area, told Nandu. Unlike the bustling modern in central Shenzhen, Shajing are typical industrial areas: grey streets, with motorcycles on the roads and factories lined on either side. The e-cigarette industry has a saying that 90% of the world’s e-cigarettes are produced in Shenzhen , 90% of e-cigarettes in Shenzhen are in Bao’an, and 90% of Bao’an’s e-cigarettes are in Shajing. In these square kilometers of neighborhoods, hundreds of e-cigarette manufacturers are growing.
But now, the industry is suddenly cooling. Tiger Global, the original founder of U.S. e-cigarette giant Juul, recently valued Juul to $19 billion at the end of the third quarter. On November 1, the State Tobacco Monopoly Bureau and the State Administration of Market Supervision and Administration issued the Notice on Further Protection of Minors from E-cigarettes, requiring all types of market entities not to sell e-cigarettes to minors, urging e-cigarette platforms to close e-cigarette stores and remove e-cigarette products from the shelves.
From the international market to the domestic market, from brand manufacturers to upstream supply chains, the e-cigarette industry is experiencing a severe pain. As the world’s veritable “fog valley”, shajings first felt the shock.
Temporarily shelving the domestic market
“There should be 2-3 e-cigarette factories in here. “After taking Nandu reporters to the gate of a science and technology park located along the Great Dawangshan Industrial Road, ” Mr Achen said. The recruitment bulletin at the entrance of the science and technology park posted a dozen factory recruitment notices, Nandu reporter noticed, two of them from the same e-cigarette factory, respectively, to recruit an experimenter and two finished product inspectors.
The remuneration of the experimenter and the finished product inspector is basically the same, 22 days a month, the base salary of 2200 yuan plus 50 full-time, Monday to Friday overtime pay 18.96 yuan / hour;
“Previously, these recruitment income is basically 6000 yuan per month, but now most of the down to about 4000 yuan. An e-cigarette business head, who did not want to be named, explained to Nandu that many factories had cut staff and lowered wages because of the reduction in orders, so that “workers who stay in the factory still have money to earn and go home for the New Year.” ”
When nandu reporters came to an e-cigarette factory, just in time for the lunch break, two workers were playing with their mobile phones at the door. One of them told Nandu reporters that their factory at the same time to domestic and foreign e-cigarette brands contract, but since November, domestic orders have shrunk a lot, “we are now focusing on foreign markets, the boss said this part can make up, is now developing Indonesia, Dubai market.”
Since August this year, the United States continued to reveal the negative health effects of e-cigarettes, Shenzhen’s e-cigarette export business was affected. But “in the past month, there have been signs of a pick-up in foreign markets, mainly because there are mature e-cigarette smokers abroad.” “In 2008 began in Shenzhen to engage in the e-cigarette industry, a brand head Zhang told Nandu reporters, “foreign market demand is still, but in the short term by the impact of policy fluctuations.” When the policy and negative news clarified, the e-cigarette market gradually rebounded, this is an inevitable trend. ”
However, the domestic e-cigarette market regulation is becoming more stringent. On November 1, the State Administration of Market Supervision and Administration and the State Tobacco Monopoly Bureau issued the Circular on Further Protection of Minors from E-cigarettes (hereinafter referred to as the “Notice”), urging the closure of e-cigarette sales websites, e-cigarette selling platforms, and the withdrawal of Internet e-cigarette advertisements. A few days later, all the major e-commerce platforms took off the e-cigarette products.
“It’s a bit awkward at this point in time. “An e-cigarette upstream supplier told Nandu reporter, near singles’day , everyone’s ads have been hit out, inventory is also in place, the result of double 11 before was told not to sell, ” a lot of e-commerce counterparts lost more. ”
Mu Dong, who has been in the e-cigarette industry in Shenzhen for five years, told Nandu that his factory used to export, both its own brand and his foundry. “We’re ready to officially enter the domestic market this year, but we don’t happen to hit the online ban on e-cigarettes, and that’s no way.” “According to Mu Dong’s statement, his factory is now 90% to do foreign trade market, the domestic market can only temporarily shelved, dare not do. “As far as I know, some of the factory losses around the peer friends are relatively large, from 500 people to more than 100 people, but also from 200-300 people to twenty or thirty people, we are trying to find a way to carry on.”
Upstream payment period increased from 30 days to 60 days
From branders to foundrys, from foundry to upstream suppliers, the entire industry chain of the e-cigarette industry is also involved. “The upstream supply chain was supposed to have a healthy payment period of 30 days, but as far as I know, there are now cases of arrears of 45 days or even 60 days. “The aforementioned e-cigarette brand Zhang surname responsible for the Nandu reporter revealed.
“Downstream customers owe me money, I owe suppliers, suppliers owe suppliers, even in this supply chain, even if any link breaks, the last layer is very uncomfortable.” ‘For now, it’s a bit cold in 2019, ‘ Mr. Muldon said.
Xiao Hua is the head of a supplier factory in Shenzhen, one of its main businesses, is to provide e-cigarette manufacturers with “scheme boards” (circuit boards in e-cigarettes). Previously, Xiao Hua’s factory mainly for export e-cigarette manufacturers supply, but from 2019, they supply to domestic and foreign markets, the proportion adjusted to three or seven open.
“Until July this year, the domestic response was good. Since the end of August, domestic orders have begun to decline, influenced by U.S. public opinion. On the eve of Singles’Day, online restrictions on the sale of e-cigarettes have been largely without domestic orders since then. Xiao Hua told Nandu reporter, customers previously booked 30,000 finished products, and now in the warehouse did not pick up, “these are mainly for some domestic customers designboards.”
Zhang surname d’or Gindu reporter also admitted that he contacted some upstream supply chain has been preparing for transformation, since March this year, some hardware factories, plastic factories, electronics factories are focused on the e-cigarette this piece, the result is doing the discovery, in fact, not so, and then had to do back to the old line. “What I’ve learned is that some manufacturers are transitioning to supply chains such as sweeping robots, headphones, and so on. ”
Xiao Hua revealed that compared to the finished factory, his factory is relatively easy to transform, “we do the program board company, the support of technical personnel, the volume is relatively small.” The measure we have to do is keep the formation, finish the work and then continue to look at next year’s market. Xiao Hua added that if the transformation, they can move to mobile electronics, fast-moving electronics, “we are transitioning more quickly, two or three months to turn around.”
However, the industry chain is under the greatest pressure is the production of factories, that is, specializing in the assembly of e-cigarette products, contract factories. “Production-type factory staff more, certainly to ‘slim down’, Xiao Hua told Nandu reporters, they are more painful, there is a large backlog of finished products, the cost is more expensive, some customers do not even pick up.
Internet players who “break the rules”
For the domestic e-cigarette “cold winter”, a number of industry insiders told Nandu reporter, long ago knew this day will come, but did not think so fast. “The big shuffle will come sooner or later, but it’s just capital, it’s advanced by Lao Luo.” If they don’t come, e-cigarettes will make another two or three years of money.” Mudong to the south of the reporter so sighed.
In January 2019, Luo Yonghao announced at the launch of Fast Asi Technology, former hammer technology core member and product director Zhu Xiaomu founded the e-cigarette brand “FLOW Flu”, and launched the brand’s first e-cigarette products, the e-cigarette industry quickly caused concern in China. Subsequently, in April 2019, Luo Yonghao launched Ono e-cigarettes as co-founder and former president of Hammer Technology, Peng Jinzhou.
“High-profile” and “capital darling” have become the key words of the domestic e-cigarette industry in the first half of 2019. According to incomplete statistics, in the first half of 2019, more than 35 cases of e-cigarette industry investment, from the disclosed investment statistics, the total investment of at least 1 billion yuan. The largest known investment is the $50 million financing received by MOTI.
Nandu reporters in the first half of 2019 to obtain investment in 37 e-cigarette companies to comb the discovery, in recent years into the e-cigarette industry”‘s “player” background, both e-cigarette industry insiders, cross-border competitors, but also traditional tobacco practitioners. In addition to Luo Yonghao, 2019 into the e-cigarette industry, “network celebrities” entrepreneurs also include “Uncle TongDao” Cai Yuedong and former Huang Taiji founder He Chang launched YOOZ e-cigarettes, with Uncle Zhang Jinyuan, vision CEO Sha Xiaopi, military sub-face CEO Zeng Hang and other head from the media co-founded” Spirit-sharp LINX” and so on.
But according to practitioners who have been in the deep-farming industry for years, internet players who are new to the industry in 2019 are “broken.” Juul’s former chief scientist and inventor of nicotine salt, Yan Chenyue, previously told nandu reporters that e-cigarette research and development is intended as a smoker to quit smoking as an option to help smokers reduce their intake of unnecessary carcinogenic substances, such as tar, nitrosamines and so on.
But reducing your intake doesn’t mean you don’t. According to Wooddon, Internet players have avoided this point when promoting e-cigarettes, over-exaggerating and exaggerating publicity on safety and health. The new brands are even targeting consumers who have never been exposed to e-cigarettes, as well as minors who have never smoked.
Nandu reporter noticed that before the announcement, many e-cigarettes in the advertising package d’etat as a cosmetics, fashion-like products, there are mint, mango, bubblegum, marshmallows and many other attractive tastes, which provides multiple labels implied, that is, safe and healthy, fashion, social status. One e-cigarette industry insider, who asked not to be named, said the label implied that it attracted young people who were not smokers themselves. In the U.S., data show that 20.8 percent of high school and 4.9 percent of junior high school students used e-cigarettes in 2018, up 78 percent and 48 percent from 2018. Focusing on the marketing of young people has really put the e-cigarette industry into real criticism.
In addition to the expansion of the user base, the domestic emerging e-cigarette brands are also facing the problem of high homogenization of products. E-cigarette users have used a number of domestic brands of e-cigarettes, told Nandu reporters, these products taste there is no difference, “even the various brands launched fruity smoke bombs are similar.”
The above-mentioned e-cigarette brand Zhang surname head told Nandu reporter, “A lot of people say that the threshold of e-cigarettes is very low, easy to make money, in fact, this is not the case.” Internet thinking is to make quick money, they are quick to get a product over, and then use the label, become their own product, and then advertising. ”
When policy boots land edding into the key
On November 15, the E-cigarette industry committee held its Standing Council in Shenzhen. It was revealed that since the announcement, due to the large volume of most businesses, a large backlog of inventory, coupled with the U.S. market is also facing a decline in sales, the market is under great pressure, “this meeting called on everyone not to panic selling products, resulting in the collapse of the price system, resulting in a ‘stampede’ phenomenon.”
At the same time, the e-cigarette industry committee also disclosed that factory-based enterprises, facing a sharp decline in orders, the need for a large number of layoffs, “the current year is coming, calling on enterprises to try not to lay off workers, proactive, to tide over the difficulties.” If there is a ultimate need for redundancy, workers should also be dismissed in accordance with the provisions of the Labour Code, so as not to cause large-scale labour disputes”.
Zhang told Nandu reporters that Shenzhen has a global voice for e-cigarette brands, “e-cigarettes were invented Chinese, and its entire industrial supply chain is in Shenzhen.” “Shenzhen surrounding cities such as Huizhou, Dongguan, etc., can provide the e-cigarette industry with upstream supply chain, and the real e-cigarette brands and assembly are concentrated in Shenzhen’s Shajing, Songgang, Xixiang, Longgang and other places.
Sky-eye data show that there are 10,684 enterprises with “e-cigarettes” in the domestic business scope, of which 6,689 are located in Guangdong, accounting for 62.6% of the total. And these e-cigarette enterprises, exports accounted for the vast majority. According to the statistics provided by the E-cigarette industry committee, China is the world’s largest producer and exporter of e-cigarette products, with total sales of e-cigarettes in China totaling 65.14 billion yuan in 2016-2018, of which total exports amounted to 52.09 billion yuan and domestic sales totaled 13.06 billion yuan. In 2018, more than 2 million e-cigarettes were employed in the country.
After the announcement, e-cigarette practitioners in the country are waiting for further and more concrete policies. According to the National Standard Information Public Service Platform, the National Standard Stakes for E-cigarettes is scheduled for 11 October 2017 with a project period of 24 months. Project progress has been online publicity, drafting, soliciting opinions, review, is still in the approval stage, has exceeded the original plan of the introduction of time.
A number of e-cigarette practitioners have told Nandu reporters, hope that the country as soon as possible to clarify the e-cigarette related policies, relevant policies, regulatory subjectisis is not clear before, we “can only sit and so on, very painful, do not know what to do tomorrow”, “e-cigarette supervision must not be a one-size-fits-all, but should be a step-by-step process.” (In this article Xiao hua, Mu Dong are pseudonyms)
U.S. retail giants stop selling e-cigarettes
At the end of 2018, Juul was valued at about $38 billion by Marlboro’s parent company, Ochia Group, for a valuation of about $38 billion, surpassing Space X and Airbnb. The valuation quickly drew worldwide attention to the e-cigarette industry.
But starting in August, the United States again triggered public opinion about the health risks of e-cigarettes, San Francisco, Michigan, New York, Montana and other places have announced e-cigarette-related bans, the largest U.S. retailer Wal-Mart, the largest drugstore chain operator Walgreen, supermarket giant Kroger has announced the end of the sale of e-cigarette products. The U.S. Drug Enforcement Administration, the U.S. Attorney for the United States of America and the U.S. Federal Trade Commission’s FTC have also launched a series of investigations into Juul. In September, Juul announced that it would stop advertising all television, internet and print media products in the United States.
It is reported that in addition to China issued a “notice” to prohibit the online sale of e-cigarettes, South Korea, India and other places have also issued e-cigarette-related prohibitions.