Watch this week: On December 17, the “2021 Fifth International Electronic Cigarette Industry Summit Forum”, guided by the China Electronic Chamber of Commerce and hosted by the Electronic Cigarette Industry Committee of the China Electronic Chamber of Commerce, was successfully held in Shenzhen.
In the first half of the conference, the theme was “Continuous Innovation, Breaching the Boundary, and Meeting the New Era of Atomization”, and discussions were conducted on topics such as the New Deal for Electronic Cigarettes and Brands Going Global. On the theme, the “2021 Electronic Cigarette Industry Blue Book” and “Twenty Years of Atomization” series of documentaries were released at the same time, attracting more than 1,000 people to attend the conference and more than 400,000 online viewers.
The rule of law and standardized governance of electronic cigarettes promote the long-term sustainable development of the industry, with broad room for growth
According to the “2021 Electronic Cigarette Industry Blue Book”, as of the end of 2021, there were more than 1,500 domestic e-cigarette manufacturing and brand companies, more than 190,000 e-cigarette retail outlets, and nearly 100,000 e-cigarette supply chain and peripheral service companies. The domestic e-cigarette industry directly employs about 1.5 million people and drives 4 million indirect jobs, for a total of about 5.5 million people. In terms of market size, in 2021, the global retail sales of atomized e-cigarettes are expected to reach US$80 billion, an increase of 120% year-on-year, and it is expected to maintain a 35% growth rate in the next three years; domestic retail sales are expected to be RMB 19.7 billion in 2021, a year-on-year increase 36%. On November 26, my country officially confirmed the identity of “e-cigarette” as a new type of tobacco product. Related management measures and national standards entered the period of soliciting opinions. It is good for electronic cigarette companies with manufacturing advantages and focusing on technological innovation and quality improvement. At the same time, the fields of health care and Chinese herbal medicine are the future application directions of atomization technology, and there is ample room for long-term growth.
E-cigarette companies have made important contributions to my country’s export earnings and created a representative industry for China’s global consumption
In terms of exports, China’s e-cigarette industry exported about 138.3 billion yuan in 2021, an increase of 180% year-on-year; the top four destination countries for export value were the United States, the European Union, Russia, and the United Kingdom, accounting for 53%, 15%, and 9%, respectively 7%, e-cigarette companies have made important contributions to earning foreign exchange through exports. At the same time, the new regulations reserve flexible space for e-cigarette exports. The consumer market for e-cigarettes is mainly concentrated in the international market, especially in European and American countries. E-cigarette companies should actively participate in the formulation of high-standard international economic and trade rules and make better use of market pricing power. In terms of safety technology, production, sales, patents, testing and certification, etc., it is interconnected with the international community to give play to the dominant power of China’s industrial advantages and the right to speak in international trade. In terms of patents, from 2003 to October 31, 2021, a total of 26,403 domestic e-cigarette patents were filed, of which liquid e-cigarettes accounted for 93.4%, China’s e-cigarette patents accounted for 90% of global related patents, and China’s production capacity accounted for global 95% of production capacity. my country has a complete electronic cigarette industry supply chain and the most patented technologies. It has become one of China’s representative industries in creating global consumption.
We believe that based on the performance of overseas tobacco giants in the new tobacco business in recent years, it can be seen that new tobacco has become an important transformation and layout direction for major companies. As my country’s atomized e-cigarette regulatory rules are gradually implemented, it will effectively push the market up. Industry thresholds, increase industry concentration, and favor upstream and downstream leading enterprises in the industry with formalized management and product quality compliance.
Investment Advice:
1） HNB industry chain: key recommendation-Huabao International/Shares （domestic tobacco flavor leader, the only private license for new flakes） [jointly covered with food and beverage team], Jinjia shares （domestic tobacco label leader, and Yunnan China Tobacco only Strategic cooperation with private enterprises） [joint coverage with the light industry team]; recommended attention: Jiyou, Shunhao, Dongfeng [light industry team coverage], China Tobacco Hong Kong, China Bolton.
2） Atomization industry chain: Key recommendation-Smol International （the leading manufacturer of atomization equipment in the world）， followed by Fog Core Technology （the leading domestic atomization brand）， and Ai Shide （the leading domestic atomization channel）。
Risk warning: the risk of new tobacco policy changes, sales/enterprise development less than expected, and the risk of intensified market competition.