Tobacco Asia

Volume 19, Number 2

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32 tobaccoasia / Issue 2, 2015 (May/June) big players in this industry and thousands of small players and what they do is exactly as what the small players in other countries do. They don't have much knowledge about this product, they're just mixing liquids in their bathtub, and this is risky." "This product, the liquid, it looks the same, it doesn't look much different from product to product, but you never know what is inside. It took us almost a decade of knowledge to come to this stage where we are fully confident that our products are safe, because we know what we are facing, what we are producing, what the process is, how to avoid contamination, how to make sure there are no toxic ingredients in the flavor that we purchase. But, those small players don't have this kind of knowledge. They might buy flavors from some unknown source and think they're safe, but that's not necessarily true." The good news is that relevant industry mem- bers and the Chinese government have started to work together, along with e-cigarette associations from other countries where regulations have been or are soon to be established, to develop regula- tions for China's e-cigarette industry. In the meantime, both Dekang and Hangsen have established production facilities overseas to better respond to the demand for their products in Western markets. Dekang set up a 3,800 sq.m facility with modern automatic production equip- ment and a GMP-certified workshop in Bucharest, Romania in September 2014. Dekang's European facility also produces DeTab, a nicotine alterna- tive product which is completely nicotine-free but provides the same satisfaction and sensation as a nicotine liquid when vaping. DeTab is created by using the latest e-liquid production technology and only environmentally- friendly ingredients. The fa- cility also produces the Dekang Europe Series and Q10 Series to meet the requirements of different countries. "There is no doubt that setting up our European subsidiary was done to speed up the logistics and provide better service to our Euro- pean consumers," said DeKang's president. "Our e-liquid products made in China and in Europe have the same strict production standards, yet to- tally different production lines and various feature products that really satisfy the needs of our cus- tomers in different countries." Hangsen's reason for setting up its facilities in Poland and the US is similar – to provide closer service to its customers. "At the end of the day, it doesn't matter where we manufacture as long as you comply with the regulations. That is what the customer is looking for," said Hangsen's vice president. "There are customers who want prod- ucts made in Europe because of closer proximity or because of the time difference they want to deal with a local office that will provide them with liq- uids made in Europe. That's fine because we have the technology and we have the expertise. From day one that the factory opened we were already receiving orders for US-made liquid or European- made liquid." Oplus, however, has chosen not to set-up an overseas facility. "We really don't want to go to that step," said Lau. "The benefit of manufactur- ing e-liquid in China is, first, we have a very good supply chain for packaging that lets you offer any kind of nice packaging to your customer, which is very difficult [in other countries]. And second, we are near to the whole industry center. Shenzhen obviously is the center of the e-cigarette industry. We want to stay near the e-cigarette manufacturers and supply liquid to them as well. But yes, if "made in China" becomes a big problem for us we'll con- sider going out to the US, the UK, or Europe." All three companies share the same opinion about the future of e-cigarettes in the Chinese market. Dekang's Zheng said, "Actually, China's e-cigarette market is growing and it also has great potential for more development. Due to the anti- smoking efforts from the government, China's smokers are gradually seeking the ideal tobacco replacement products. E-cigarettes have become the best choice for smokers. With a large number of China's population being smokers, there is no doubt about the great potential of the Chinese e- cigarette market." Hangsen's Yao agrees. "It is actually growing, and growing fast. Once more and more people get to know [e-cigarettes], I'm sure it will be huge be- cause the market is so big." Oplus' Lau believes that the right marketing strategies will also help the industry grow in the Chinese market. "[Starting in 2013], major com- panies, mostly from tobacco-related industries like cigarette packaging and tobacco flavoring, started entering the Chinese market. Those companies have financial and channel advantages, but their experience of e-cigarettes and knowledge of this unique market [is yet not enough]. The time of ex- plosive growth will come soon when [e-cigarettes] finally have the attention of the right people with the right marketing strategies." DeTab nicotine alternative

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