Tobacco Asia

Volume 20, Number 1

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Page 39 of 75

40 tobaccoasia / Issue 1, 2016 March / April) the market potential be properly tapped. Other- wise, the market of e-cigarettes, with enthusiasts as the principal players, will have no future. Whether there is a successful shift of conceptual thinking in this area will be the most vital to whether the e- cigarette manufacturing sector is able to escape the bottleneck in its business development. Diversification of products As far as the entire tobacco industry is concerned, it is clear that transnational tobacco giants have im- plemented the policy of developing and manufac- turing small-sized e-cigarette products that target the general public, and have been cautious in pre- senting new products to the market because of the latest regulatory policies in various countries. The new products presented by them are highly simi- lar. It would seem that these new products do not meet the existing demand of current consumers, but they are designed for e-cigarette consumers in the future, mainly traditional cigarette smokers. Even large tobacco companies will not nec- essarily all take up e-cigarettes as their new types of tobacco products without exception. British American Tobacco has developed a new product – Vype – as a leading player of its e-cigarette line. It has also developed a smokeless nicotine inhaler called Voke, and has received a medical license for it. By doing so, it can enjoy a greater share of the electronic cigarette market, buy can also market Voke as a nicotine inhaling medical device should e-cigarette sales turn weak. Philip Morris International (PMI) has also become a player. At a conference of investors in June 2014, PMI unveiled its timetable for unveil- ing a series of new tobacco products, indicating it has far-reaching plans for developing new types of tobacco products ranging from the heating non- burning IQOS to carbon rod products, and from general small-sized e-cigarettes to the EGO type of e-cigarette product called Vivid, which meets the stringent requirements of EU regulations. The choice of timing for these products is interesting: the company has chosen to present the products to the market in the third quarter of 2016 – tying it tacitly with May 20, 2016 – the date when the EU's regulatory policy on electronic cigarette products goes into effect. Both transnational tobacco giants have planned to convert their previous consumers of tobacco products into consumers of e-cigarettes at a time when it is vitally important for them. They have both accurately grasped the mainstream consumer market, and have both presented new types of to- bacco products better meeting the demand of the general public. So, should Chinese e-cigarette manufacturing sector start experimenting to develop new types of tobacco products? In reality, not only e-cigarette makers, but also government-run tobacco manu- facturers in China have started active research and development of new types of tobacco products, which strategically meet their long-term interests. However, the e-cigarette manufacturing sector has so far been immature and unstable and there will still be many new ways of developing new types of tobacco products. Reynolds American Inc. has even revitalized heating carbon rod products that first came to the market in the 1980s, well ahead if their time. This year, Japan Tobacco Inc. is planning to present its new Ploom line products that it had acquired from Pax Lab. I also looks like in 2016, low-temperature non-burning products will be all the rage. The ordinary e-cigarette is sure to face some strong competition. Prospects for Future Development Some electronic cigarette manufacturers in China have achieved amazing success in international markets. They began to give great importance to developing competitive brands of e-cigarettes as early as three years ago. They also tried to develop stand-alone competitive brands through existing international marketing channels. So far, five or six manufacturers are considerably competitive. It is not rare for any of them to see annual sales rev- enue to top RMB 1 billion (US$159 million). As far as manufacturing of e-liquid for e-cigarettes is concerned, Chinese manufacturers have fallen over each other to set up operations abroad, and as a result, they are currently under no obvious pressure from policy-makers. Since e-liquids manufactured in China are inexpensive but of fine quality, they have already taken some market share in Europe and the US, which stood at 10-20% two years ago. Meanwhile, rival foreign e-liquid manufacturers have gradually got a firm foothold in their own countries. They solved the puzzle of technology and cost quite a few years ago. Moreover, the protection of the various patented technologies previously developed or possessed by Chinese e-cigarette manufacturers will be weakened as a result of upgrades or product substitution. Because of regulatory and economic uncertain- ties, it seems that the electronic cigarette manufac- turing sector in China and all over the world now faces ambiguous prospects for future business de- velopment. Yet, there is one thing that is certain for the e-cigarette manufacturing sector in China: the potential of the domestic market of new types of tobacco-substitute products represented by e-cig- arettes is amazing. Only by rationally identifying a right group of consumers and starting to develop safe and effective new products that meet the de- mand of the general public will it succeed in realisti- cally tapping the potential of the market in China, which will be in the interest of all consumers.

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