Unlocking a Multi-Billion Dollar Global Market: Two Major Advantages of Chinese Vaping Companies

With the growing global awareness of health, the traditional tobacco market is gradually shrinking, especially in developed countries where tobacco control policies are becoming stricter. Many countries have even started imposing high tobacco taxes or enforcing tighter regulations on smoking areas. Meanwhile, the concept of "harm reduction" has given rise to vaping, a relatively new alternative product, which has seen a positive growth trend and attracted heavy investment from major traditional tobacco giants. As a newer alternative, vaping has captured the attention of more and more consumers, and its market growth momentum is undeniable, particularly in a world where health awareness is continually increasing.

The Challenges of the Traditional Tobacco Market and the Rise of Vaping

According to statistics from the World Health Organization (WHO), there are about a billion traditional cigarette consumers worldwide. However, with the tightening of tobacco control policies and the increasing public health awareness, the traditional cigarette market is beginning to shrink. This trend is especially evident in developed countries in Europe and North America, where tobacco consumption is on the decline. Many countries have introduced smoking bans, increased tobacco taxes, and launched anti-smoking campaigns to reduce consumption and harm. In this context, traditional cigarette companies face severe challenges and urgently need to find new growth opportunities.

In contrast, vaping, as an alternative product, has experienced rapid development in recent years. With a core philosophy centered around "harm reduction," vaping aims to provide a relatively healthier alternative to traditional tobacco products. The vaping market has been expanding continuously, becoming the choice of more and more smokers. According to Euromonitor data, the global vaping market sales reached $48.55 billion in 2019, with a year-on-year growth of 19.4%. Although growth has slowed, the market penetration and market share of vaping products continue to increase, rising from 2.29% in 2014 to 5.94% in 2019.

Main Components of the Vaping Market

The global vaping market can be divided into several types of products, including vapesand heated tobacco products (HTPs). According to 2019 data, the sales of vapesreached $20.2 billion, a year-on-year increase of 28.43%. This reflects the strong growth momentum of vapes in the market, particularly in Europe and North America, where vape shave a more prominent market share. For example, in the U.S., vapesaccount for 47.77% of the market, 13.40% in the UK, and 6.85% in China. Although China’s vaping market is relatively new, its popularity is gradually rising as the market continues to develop.

Despite challenges like increasing regulatory scrutiny, the global vaping market continues to show an upward trend. As an alternative to traditional tobacco, vaping provides smokers with more options and offers traditional tobacco companies an opportunity for transformation. In this market landscape, vaping undoubtedly represents the mainstream direction for the future development of the tobacco industry.

The Transformation of Tobacco Giants

The four largest global tobacco companies—Philip Morris, British American Tobacco, Japan Tobacco, and Imperial Brands—are all actively transforming and expanding into the emerging vaping market. Through acquisitions, technology development, and launching proprietary brands, these tobacco giants aim to secure a foothold in the vaping industry.

For example, Philip Morris launched its IQOS heated tobacco product, accumulating a large number of users worldwide and strongly promoting its "smoke-free" future strategy. According to the company’s report, vaping products contributed to 18.7% of Philip Morris's revenue in 2019. British American Tobacco introduced its Vype e-cigarette brand, with vaping products accounting for 4.36% of its revenue in 2019. Other tobacco companies are also entering the vaping market, seeking to sustain and grow their market share through this new product.

These traditional tobacco companies' transformations are not only aimed at responding to the decline of the traditional tobacco market but also at seizing the new growth opportunities in the vaping market. With the increasing adoption of vaping products and growing consumer demand, more and more tobacco giants are shifting resources towards vaping, investing more in research and development and market promotion.

Dual Advantages of China's Vaping Industry Chain

Although China’s vaping market started relatively late, with the rise of the vaping industry, Chinese vaping companies have gradually emerged on the global stage, driven by the dual forces of industry chain advantages and brand development.

Industry Chain Advantage

China's position in the vaping industry chain cannot be underestimated. From upstream raw material supply to midstream design and manufacturing, to downstream sales, China has established a complete vaping industry chain. China is the largest vaping production base globally, with nearly all major vaping brands outsourcing manufacturing to Chinese companies. According to statistics, in 2019, 218 countries and regions worldwide purchased vaping products from China. This robust industry chain advantage gives Chinese vaping companies a clear competitive edge in cost control, production efficiency, and technological innovation.

Chinese vaping manufacturers primarily operate under the OEM (Original Equipment Manufacturer) and ODM (Original Design Manufacturer) models, providing production services for global brands. This not only helps domestic companies accumulate rich technological experience but also gives them greater influence within the industry chain. Years of OEM experience have enabled Chinese companies to accumulate deep technical expertise in product design, production process optimization, and technology development. For those capable of building their own brands, the accumulated technology and supply chain experience lay a solid foundation for the transition to creating independent brands.

Brand Development Advantage

In addition to the industry chain advantage, Chinese vaping companies also have unique strengths in brand development. Chinese companies typically focus on consumer experience and have accumulated substantial market experience in electronics and fast-moving consumer goods (FMCG). Chinese vaping brands are able to quickly identify consumer needs across different countries and cultural backgrounds, launching vaping products that cater to local market demands.

RELX is a prime example of this strategy. As China's largest vaping brand, RELX not only dominates the domestic market but has also made significant achievements in international markets through innovation and excellent user experience. By the end of 2019, RELX had entered 43 countries, including Canada, the UK, and New Zealand, with overseas revenue accounting for 25%, a proportion that continues to grow.

RELX's success is closely linked to its technological innovations and product experience optimization. By adopting an internet-driven mindset, focusing on user needs, and integrating the industry chain to facilitate rapid product iterations, RELX has been able to stand out in the fierce international competition and become a model for Chinese vaping brands entering the global market.

The Global Expansion of Chinese Vaping Brands

In addition to RELX, a number of Chinese vaping companies are working hard to expand into international markets, laying the foundation for the global growth of China’s vaping industry. With domestic market constraints, Chinese vaping brands are looking abroad to leverage global market opportunities for greater growth. Professor Yao Jianming from Renmin University of China’s Business School believes that the "going global" strategy of the vaping industry shares similarities with the global expansion of the smartphone industry. Smartphone brands like Xiaomi and Huawei accumulated strong user bases and brand influence in China before successfully expanding into international markets. Similarly, for vaping brands, despite the domestic market being subject to regulatory control, establishing brand advantages in international markets can also drive the development of China’s vaping industry.

For Chinese vaping companies, entering overseas markets requires not only strong product capabilities but also flexible market strategies. As Chinese vaping brands gradually rise on the international stage, other companies may also follow RELX’s successful path to build globally competitive brands. By continuing to innovate, focusing on user experience, and enhancing brand recognition, China’s vaping industry will undoubtedly open new doors for global development.

Conclusion: The Dual-Drive of Industry Chain and Brand

Overall, China’s vaping industry is in a period of rapid development, and the key to driving this growth lies in the advantages of the industry chain and the development of independent brands. Chinese companies are increasingly significant within the global vaping industry chain, and through the dual-drive of "industry chain + brand," Chinese vaping companies are expected to improve their competitiveness and influence in the global market.

In the future, as technology continues to innovate, markets expand, and consumer needs diversify, Chinese vaping companies will continue to leverage their advantages in the industry chain and, through brand building and market expansion, secure a strong presence in the global vaping market. For the tobacco industry, the rise of vaping represents not only a transformation of the industry but also provides consumers with more choices, helping the global tobacco sector move toward a healthier and more sustainable future.