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Jinjia’s electronic cigarette business increased significantly in the first half of the year

By August 28, 2022September 5th, 2022Blog

With the gradual landing of industry norms and the rapid increase in the penetration rate of electronic cigarettes in China, JINJIA shares, which hold raw materials, production and even brand licenses, provide room for the capital market’s imagination in the ever-releasing incremental demand.

Jinjia Industrial Park

Electronic cigarettes welcome the golden period of development

Since the invention of electronic cigarettes by Chinese pharmacist Han Li entered the market in 2003, the entire tobacco industry pattern was broken. Traditional cigarettes no longer reign supreme, and e-cigarettes, which are full of technology, are expanding at a compound annual growth rate of 24.9%.

Specifically, overseas markets are expanding more rapidly. The 2021 Electronic Cigarette Industry Blue Book shows that the market size (retail) of e-cigarettes in China will be 19.7 billion RMB in 2021, up 36% year-on-year; the retail size of foreign markets will be 80 billion USD, up 120% year-on-year, with a compound growth rate of 35% in the past three years.

In fact, the beneficiaries of high growth in foreign markets are still Chinese companies. As the country of origin of electronic cigarettes, China has developed to date has 87.3% of the global electronic atomized cigarette patents, more than 90% of production, and nearly 90% of exports. According to statistics, China’s e-cigarette exports reached seven times the domestic sales volume in 2021, at 138.3 billion RMB, an increase of 180% year-on-year. The total export of e-cigarettes is expected to reach 186.7 billion RMB in 2022.

Accordingly, the global e-cigarette users broke through from 7 million in 2011 to 80 million today, and this scale is only 7% of the global number of smokers. In countries around the world to promote “harm reduction” and tobacco substitution trend, e-cigarette users will continue to grow.

From the perspective of penetration, the growth potential of the Chinese market is even greater. According to public data, China’s e-cigarette market penetration rate is only 1.5% in 2021, much lower than 38.0% in the United States, 30.3% in Japan, and 20.9% in the United Kingdom. And China has the world’s largest base of smokers, and the momentum of demand growth far exceeds that of the United States. Therefore, the next few years may be a golden period for the e-cigarette industry, and local companies will fully benefit from the dividends of the Chinese market.

R&D and whole industry chain control become the core competitiveness in the future

The free-form booming development of China’s e-cigarette industry has been ushering in a series of documents to regulate it since November 2021.

The “Electronic Cigarette Management Measures”, which will come into effect on October 1, 2022, stipulates that businesses engaged in the production of raw materials, component production and product sales of electronic cigarettes should obtain a license, and electronic cigarette products should comply with mandatory national standards. This marks the end of the era of disorderly development of new tobacco in China.

With the gradual implementation of regulatory rules, the industry access threshold will be significantly increased, and tens of thousands of “small, scattered and poor” type enterprises will gradually exit the market. With compliance qualifications, research and development strength, scale ability of the head of the enterprise will occupy the main position in the market, and further drive the standardized, healthy and sustainable development of the electronic cigarette industry.

In this regard, Galaxy Securities issued a research report that, on the one hand, the policy directly stipulates the standard of electronic cigarette product-related parameters, increasing the difficulty of product development and production, eliminating backward enterprises; on the other hand, the policy through the taste and nicotine content, release, etc., to a certain extent to limit the use of electronic cigarette experience. How to improve the user experience as much as possible under the restrictions of the policy standards, depends on whether the enterprise has sufficient R & D technical strength.

Ariadne Consulting also holds a similar view, and its “China Electronic Cigarette Industry Research Report 2021” points out that: China’s electronic cigarette industry highlights the attributes of science and technology, product development and the ability to control the whole industry chain requirements, and will become the core competitiveness of the brand in the future. The report predicts that the industry growth will explode within two years.

JINJIA shares in advance of the deep layout of the electronic cigarette industry chain

Jinjia has been involved in the field of electronic cigarettes for a long time. Thanks to the industrial synergy advantage of the traditional cigarette label business, Jinjia shares are positioned in advance in the new tobacco track, with a comprehensive layout through “endogenous + M&A”.

Among them, Yunnan Yunshuo Technology focuses on atomized tobacco oil; Shenzhen Yunpu Xinghe and Jinjia Technology focus on atomized e-cigarette OEM; InnoTaste Technology focuses on its own atomized cigarette brand Foogo; Yunpu Xinghe provides new tobacco supply chain services for domestic and overseas customers; Hong Kong Hengtian Commercial is responsible for import and export trade and marketing of new tobacco-related products.

Information shows that, as a manufacturer of vape oil research and development that determines the smoking experience of e-cigarettes, Yunshuo Technology positions itself at a high point in the industry coordinates for comprehensive planning – With its headquarters in Kunming, it can enjoy the advantages of biological resources in Yunnan Province; it has built five professional laboratories for biological flavoring, natural plant extract, biological fragrance production, electronic atomization integrated development, and whole cigarette design, equipped with high-end precision instruments and equipment to ensure the level and efficiency of R&D; through biological target extraction technology, it can obtain high-quality, diversified and cost-effective cigarette oil flavorings; it has entered into an industry-university agreement with Kunming Institute of Botany, Chinese Academy of Sciences, Hong Kong University of Science and Technology and other institutions. Hong Kong University of Science and Technology and other institutions to reach a strategic cooperation between industry, academia, research and innovation to ensure technological iteration and technological leadership.

At present, the production capacity of its 100,000-grade pharmaceutical factory in Shenzhen can reach 3,000 tons/year. Downstream cooperative customers include Hongta Tobacco, Honghe Tobacco, Dubai Oriental Tobacco Company, Philippines Pudence Tobacco Company, Myanmar Global Tobacco Company and dozens of other companies outside China.

Engaged in ODM/OEM services of new tobacco products, Yunpu Xinghe and Jinjia Technology adopt the cooperation model of synchronizing R&D with key customers to establish first-mover advantages and quickly enrich product lines, covering heated cigarette smoking devices, disposable e-cigarettes, replacement e-cigarettes and CBD atomizer devices, which can meet the different needs of customers of brands such as Yueh-Cheng, Suorin and Gippro. Its products are sold to China, the United States, Japan and other regions or countries.

In terms of downstream private brands, the company has launched FOOGO innovative atomization class e-cigarette series products, which have achieved a certain degree of market awareness and reputation. In the digital brand value list of the e-cigarette industry in the second quarter of 2022, the FOOGO brand was ranked fifth.

In July and August this year, Jinjia shares have announced that its cloud scintillation technology, cloud Pu Xinghe were awarded the production license and OEM license of atomizers for tobacco monopoly manufacturers, and successfully entered the escalating war. Some industry sources revealed that Jinjia shares also have a number of subsidiary licenses being applied for, and its application for a brand operating license has been accepted. This means that the moment the brand license arrives, Jinjia shares will become the electronic cigarette company with the most industry chain licenses in A shares.

The relevant person in charge of Jinjia shares said that getting the license is a reflection of the company’s strength. The deep layout of the industry chain will effectively reduce the comprehensive cost of customers and enhance customer stickiness. The company will make full use of the policy norms to release the maximum potential in the industry opportunities.

In fact, in addition to industry opportunities, headquartered in Shenzhen, Jinjia shares are also sitting on the geographical advantage.

The “2021 China (Shenzhen) Electronic Cigarette Industry Development White Paper” released by the Southern Metropolis Daily on June 7 points out that more than 70% of the world’s electronic cigarette products are produced and exported by Shenzhen, Shenzhen considers the electronic cigarette industry as an emerging growth point, and will stand in the Great Bay Area to coordinate the planning of the industry pattern and give a high degree of support to innovative enterprises.

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