Red Star News intern reporter Zhou Weihao reporter Pan Junwen
Edited by Zhang Xun
"It can be closed now."
On March 11, 2022, the State Tobacco Monopoly Administration issued the "Administrative Measures for Electronic Cigarettes" and "National Standards for Electronic Cigarettes (Second Draft for Comment)", proposing that from May 1 of the same year, the sale of flavored electronic products other than tobacco flavors will be completely banned. Cigarettes and electronic cigarettes that can add their own vaping substances.
In addition, the long-discussed inclusion of e-cigarettes into the tobacco management system and the implementation of monopoly management have finally come to fruition.
After the news came out, several groups that Li Xizhao belonged to fell into silence.
Some dealers said that they are going to change their careers, and some people are holding a wait-and-see attitude and plan to wait and see.
A secondary market investor with a heavy position in Smol sent a WeChat message saying, "I feel very bad these days."
Li Xizhao didn't feel very well. After realizing that the rules and gameplay of the entire industry would change, she resigned from the CMO position of Xiwu. With the gradual clarification of domestic policies, e-cigarettes will be exclusively managed and sold.
Three years ago, Li Xizhao gave up his position as a senior manager at Tencent to work in the e-cigarette industry.
Having experienced the ups and downs of the entire industry, looking back, she felt that the arrival of regulation was expected, "It must be right to limit those messy flavors, those flavors will make people smoke one by one, like a drink. ."
Electronic cigarettes are not beverages. For this, Li Xizhao said with certainty, "Smoke is smoke."
①
Enter
From appearance to disappearance, the "window" of electronic cigarettes has only lasted for less than a year.
At the end of 2018, Altria, the world's largest tobacco company, bought a 35% stake in the e-cigarette brand JUUL for $12.8 billion. JUUL's valuation soared to $38 billion, and it gave $2 billion to reward more than 1,500 employees. On average, Each received a year-end bonus of $1.3 million, and this news set off a storm of capital on the other side of the ocean.
Driven by leading capital such as Sequoia, IDG, and Source Code, with the goal of "creating China's JUUL", the domestic e-cigarette industry has begun to make rapid progress. In 2019, a total of more than 30 brands received financing, with a total amount exceeding 1 billion.
The industry generally refers to 2019 as the first year of the development of electronic atomizers in China. Under the enthusiasm of capital, RELX, Yuzi, Ono and other brands have emerged, and a large amount of funds, talents and technologies have converged towards this "emerging" industry.
In July of that year, Li Xizhao, who was on a business trip, received a call from Silicon Valley investor Thomas Yao, inviting her to join the newly created e-cigarette brand Xiwu.
Li Xizhao, who didn't know much about e-cigarettes, asked the other party a question: Does selling e-cigarettes hurt people?
Thomas Yao did not answer directly. He said that there are already hundreds of millions of smokers who smoke every day, and second-hand smoke also causes great harm. "If you can do one thing, it can help these people who have smoked to change, and it will hurt. Smaller, why not?"
In fact, whether e-cigarettes can reduce harm and what the harm reduction effect is, there is still controversy in the academic world, but there is no doubt - no matter how much the harm to the human body can be reduced compared to traditional cigarettes, e-cigarettes themselves will have a negative impact on the human body. Health causes additional negative effects.
Before receiving the call, Li Xizhao, a non-smoker, knew almost nothing about e-cigarettes.
After this call, she began to observe the people around her and found that many of her colleagues were smoking e-cigarettes, and the number of e-cigarette users around her was quietly increasing. After two months of consideration, Li Xizhao finally made a decision to give up her vaping business in Dachang. work and move into this unfamiliar industry.
This is not an easy decision to make. In the past 10 years, Internet giants such as Tencent and Alibaba have become synonymous with "success".
Entering a big factory means that "roll" wins most of his peers, earns an annual salary of hundreds of thousands, and has greater autonomy in workplace choices.
After learning about the market prospects of the electronic cigarette industry, Li Xizhao decided to try to see if he "can survive" in the entrepreneurial project.
Li Xizhao still remembers the shock he felt when he first started the business: several new financings were announced in a month, and those who made mobile phones, the Internet, printers, public accounts, and blockchains... all flooded. Come in, "capital was crazy at that time".
In fact, the threshold for entering the e-cigarette industry is not high.
At that time, the market was full of products that had not been tested for safety. Since there were no relevant industry standards for electronic cigarettes, any small factory or workshop could be filled with oil for production, and oil-filled electronic cigarettes could be purchased online.
Li Xizhao said that this kind of product is particularly dangerous. "You don't know what ingredients are in the oil, and he may not know if the heavy metals exceed the standard."
There is no high technical threshold. After the influx of capital, thousands of emerging e-cigarette brands emerged in the market overnight, and these brands fell in batches in the subsequent rounds of policy adjustments.
Mr. Chen (pseudonym), the founder of a certain brand, recalled that their company was a start-up at that time, investing more than 5 million yuan, and successfully established production lines and online channels.
②
fanaticism
Mr. Chen's team initially planned to "all in" online channels, but this strategy, which seemed correct at the time, became the beginning of the collapse.
With the entry of a large number of new brands, online channels have become a key front for small brands to "overtake on curves", and dealers are tacitly encouraged to bring goods through micro-business, which has become the norm in the industry.
You only need to pay an agency fee ranging from 20-100 yuan to obtain agency rights from the brand. Some brands will also provide a complete customer acquisition process and related materials.
Compared with the counter agency, the threshold of the micro-business agency is almost zero: no rent, no business license, as long as there are customers, you can turn electronic cigarettes into a steady stream of cash flow.
The proliferation of micro-businesses quickly became the focus of supervision.
On October 30, 2019, the State Tobacco Monopoly Administration and the State Administration for Market Regulation issued the "Notice on Further Protecting Minors from Electronic Cigarettes", which clearly stated that electronic cigarettes should not be sold to minors, and that minors should be prevented from purchasing through the Internet. And smoking e-cigarettes, e-cigarette shops, sales websites, etc. should be closed in time.
When the "Online Ban" was issued, Li Xizhao was at the Shanghai International Electronic Cigarette Exhibition, packing up exhibits with his colleagues.
As soon as the news landed, there was almost no reaction time. All brands began to rush to the offline business district. She was also busy meeting with the team to discuss the next plan.
The subsidy war in the electronic cigarette industry started, and brands such as YOOZ, Bode, SNOWPLUS, MOTI Magic Flute, etc. shouted the "10,000-store plan".
According to Li Xizhao’s recollection, during that time, the entire market fell into a frenzy, “There were only so many good shopping malls and so many good locations, and it gradually developed into a swarm of rush shops. At the craziest time, a shopping mall in Changsha opened 26 electronic stores at the same time. Tobacco shop."
The rental price of the e-cigarette brand in the shopping mall is one price per day. Li Xizhao’s company has just negotiated the location of a shopping mall in Shenzhen. The next day, the shopping mall said that the shop has been rented out, and another e-cigarette brand directly added 100,000.
In addition to grabbing land, grabbing people is also the highlight.
After the promulgation of the "online ban", big brands have spent large sums of money to attract channel providers in order to obtain as many offline channels as possible.
On March 4, 2020, Bode announced the policy of subsidy of up to 660,000 yuan per store at the Chengdu exhibition, and there is no time limit or limit. This industry's highest subsidy amount was compared by grapefruit after half a month - single Store subsidies exceed 1 million, with a maximum of 1.18 million.
The e-cigarette brands have drawn a beautiful blueprint of "quick payback and huge profits". It seems that as long as they open a brick-and-mortar e-cigarette store with high subsidies, they can make a steady profit.
Subsidies are not that easy to get.
Brands will not issue subsidies in cash at one time, but take the form of freight forwarding, or installment payment for containers, rent subsidies, etc. In order to get the money, in addition to selling the goods, the channel providers also need to meet the requirements. Various locations and sales requirements.
In addition, under the "involution" of subsidies, the profit margins of the entire industry began to be compressed, and a number of small and medium-sized brands were eliminated.
Li Xizhao pointed out that the withdrawal of many e-cigarette manufacturers is not because of the market or policy, "it is really 'rolled', and everyone has no profit from 'rolling'."
Mr. He (pseudonym) once worked for an e-cigarette brand that raised tens of millions of dollars. When he first entered the industry, he felt that everything was fine, and many dealers were also prosperous. "Most of them are making money."
Until the policy suddenly began to tighten, the "involution" of the industry became more and more intensified, and Mr. He had the idea of leaving. "The industry can't see hope and feels that he can't work hard."
③
get away
As the end of the entire industrial chain, dealers and shop owners have high expectations for electronic cigarettes.
In Li Xizhao's mobile phone address book, there are thousands of individual entrepreneurs who have opened e-cigarette shops. In the past, they would give her product feedback every day.
Opinions are mainly focused on details. For example, this product is easy to smoke when you first start smoking, but the smell begins to fade after half a pod is smoked. Another example is a product with jasmine Longjing flavor, why not make the Longjing flavor stronger? Make the jasmine flavor lighter.
Some even suggest changing the packaging. "The user group you are targeting is mature smokers, and the packaging should be of a higher grade."
These continuous opinions and suggestions constitute Li Xizhao's daily work. This is where she feels the biggest gap between the e-cigarette industry and the Internet. She contacts real people and talks about simple and direct things. , "Without any fuss, very pragmatic."
What impressed her most was a shop owner in Karamay, Xinjiang. Every time a new product was released, he would send it to him first, so that he could test the data of the product after long-distance flight, altitude change, and temperature change.
The other party will also test immediately after receiving the samples, and the two parties will work together to improve the product.
But before Li Xizhao left, many of these bottom-level entrepreneurs had fled the e-cigarette industry.
As far as she knows, there is a store owner who has opened several stores, and he closed the store and began to prepare for the exam; another store owner originally sold mobile phones, but later switched to selling electronic cigarettes, and now he has changed his career and returned.
The call to escape has already appeared in 2021.
On March 22 of this year, the Ministry of Industry and Information Technology and the State Tobacco Monopoly Administration issued the "Decision on Amending the Regulations on the Implementation of the Tobacco Monopoly Law of the People's Republic of China (Draft for Comment)", and non-compliant advertisements and guidance were suspended. , the regulation of the industry has become more standardized.
Then on May 26, the National Health Commission and the WHO Representative Office in China jointly released the "China Smoking Harmful Health Report 2020", stating that "there is sufficient evidence to show that e-cigarettes are unsafe and will cause harm to health."
On November 26 of the same year, the Chinese government website issued an announcement stating that in order to strengthen the supervision of new tobacco products such as e-cigarettes, the State Council decided to make the following amendments to the "Regulations on the Implementation of the Tobacco Monopoly Law of the People's Republic of China": add one article as Article 65: "Electronic cigarettes and other new tobacco products shall be implemented with reference to the relevant regulations on cigarettes in these regulations."
And the boots that worry practitioners the most are also showing signs of falling - the national standard for electronic cigarettes.
In October 2017, the national standard-setting plan for e-cigarettes was issued, but since June 2019, the status of this plan has remained at "approved".
Until October 2021, the status of this plan was suddenly returned to "under review", and by November 30, the national standard for "electronic cigarettes" (draft for comments) was released. Mandatory specifications for signs, etc.
In the face of this draft for comments, the industry's interpretation is that e-cigarettes will be included in the tobacco monopoly system, and the dealers and distributors of enterprises will lose their advantages, and it will be difficult for small brands to survive.
Mr. Chen's entrepreneurial team has made a decision to completely give up the e-cigarette business, change course, and go into low-alcohol alcohol.
Since the backlog of inventory products could not be cleared smoothly, they will be accumulated until they expire in February 2022, and then they will be cleaned up by collecting waste products.
Regarding this entrepreneurial experience, Mr. Chen's evaluation is, "Basically all losses."
Mr. He also resigned from the former team. After leaving, he heard that the old owner sold to a big company in the industry, and many colleagues joined the new company.
④
vitality?
Regarding the future of the electronic cigarette industry, Mr. He's judgment is that there are still some opportunities overseas. "The overseas market can still be a brand, and many manufacturers are also turning to it."
The capital war between the big brands has started again. Li Xizhao found that many HR and headhunters of the brands and supply chain factories are busy recruiting overseas sales positions. The monthly salary of overseas sales managers has reached 60,000 yuan.
According to the "2021 Electronic Cigarette Industry Blue Book" data, the domestic market size (retail) of electronic cigarettes in 2021 is expected to be 19.7 billion yuan, and the total export value of China's electronic cigarettes will reach 138.3 billion yuan in 2021, which is 7 times the size of the domestic market.
Electronic cigarettes are in greater demand abroad and have a larger sales market.
Going to sea is not easy.
Mature markets in developed countries have high barriers to entry.
For example, in the United States, new tobacco products can only be legally sold through PMTA (tobacco pre-marketing application). However, the process of applying for PMTA is very cumbersome, the cost is huge, and the requirements for the team are not low. Only large e-cigarette companies can afford it.
As for markets such as Southeast Asia and Africa, although the barriers to entry are not so high, if the supply chain is to be set up in these regions, the labor level, supply chain coordination ability and production efficiency are all practical problems that need to be solved.
After resigning from his job, Li Xizhao had enough time to read only half of the "Principles" he had read before.
The author of this book is Ray Dalio, the founder of the hedge fund Bridgewater Fund. In the preface of the book, the successful businessman who has been in the capital world wrote: As long as the principles are true, you can choose whatever you want Set your own principles.
Li Xizhao sees the ongoing changes as a good thing. She believes that as long as all links are compliant and implemented in accordance with national standards, the e-cigarette business can start again.
As for the direction of re-start, Li Xizhao said that it is to return the electronic cigarette to the cigarette itself: "Smoke is smoke."