Diversification Strategy: Striving for Resilient Breakthrough - Analyzing the Ecology of Domestic Electronic Cigarette Manufacturers

As is well known, China is the global hub for electronic cigarette R&D and manufacturing, serving as the cornerstone of the global e-cigarette supply chain. Chinese e-cigarette manufacturers have successfully become indispensable partners for international brands and distributors, providing everything from basic components to complex finished products. At their peak, there were tens of thousands of e-cigarette manufacturers, commonly known as OEM/ODM factories.

Since the domestic and foreign markets entered the compliance era, the dividend period of barbaric growth has ended. Under the wave of market selection, low-quality and inefficient products have inevitably been eliminated. The remaining OEM/ODM enterprises have made achievements in production capacity, cost control, and product innovation, proactively transforming their businesses to adapt to the latest market demands and regulatory policies.

This article takes listed manufacturers as a starting point, using 2024 financial reports, market research, and other research materials to present the latest ecology of e-cigarette OEM enterprises. These listed companies include SMOORE , ITSUWA, etc., which are listed on the Hong Kong Stock Exchange, Shenzhen Stock Exchange, and New Third Board. Of course, many powerful and technological unlisted enterprises are not included due to the lack of disclosed performance.

1.Smoore: Increase investment in its own brands and enhance risk resistance

Once, relying on OEM for domestic leading brands and international tobacco giants, Smoore created an impressive record of listing on the Hong Kong stock market. Its market value once reached hundreds of billions of Hong Kong dollars, becoming the goal that many e-cigarette OEM companies yearn for. With the compliance of the domestic e-cigarette industry, e-cigarette sales have fallen sharply, which has had a serious impact on Smoore International's business. As a result, the process of business transformation has begun, and it has begun to increase investment in overseas markets and focus on cultivating the growth of its own brands.

According to the financial report, Smoore's total revenue in 2024 was approximately 11.799 billion yuan (RMB, the same below), an increase of approximately 5.3% over last year; net profit fell 20.78% year-on-year to 1.303 billion yuan, mainly affected by R&D investment (1.572 billion yuan, +6%) and management expenses.

The financial report focuses on its progress in its own brand business to demonstrate its continuous improvement in risk resistance. In 2024, Smoore reaped a lot of benefits in its own brand business, and the proportion of its own brand business revenue continued to increase. It is reported that its own-brand business revenue is about 2.475 billion yuan, a sharp increase of 34.0% over last year, and the proportion of total revenue has increased from about 16.5% last year to about 21.0%.

From the perspective of the market distribution of own-brand products, the sales of electronic atomization products in the international market have made outstanding contributions, with revenue of about 2.024 billion yuan in Europe and other markets, an increase of about 37.2% year-on-year; the US market achieved revenue of about 424 million yuan, an increase of about 14.0% year-on-year. In the Chinese mainland market, revenue is about 27 million yuan, mainly from the sales of atomization beauty products.

In terms of own-brand products, they are mainly electronic cigarettes and atomization beauty. The former includes iterative products XROS 4 and XROS 4 Mini, as well as open product VAPORESSO, which has become the leading brand in this field; the latter is an atomization beauty product launched in the domestic market in 2024, with annual revenue of about 27 million yuan.

In terms of OEM business, revenue still accounts for 79%, a decrease of 4.5 percentage points compared with last year. The overall revenue is 9.324 billion yuan, a year-on-year decrease of 0.3%. Among them, in Europe and other markets, Smoore International's OEM products are mainly electronic atomization products, heat-not-burn products, and technical services, with annual revenue exceeding 5 billion yuan, a year-on-year increase of 0.3%; in the US market, Smoore International's OEM products are mainly electronic atomization products, special-purpose atomization product components, and technical services, with annual revenue approaching 4 billion yuan, a year-on-year decrease of 2.4%; in the Chinese market, Smoore International's OEM products are mainly electronic atomization products and technical services, with annual revenue of 239 million yuan, a year-on-year increase of 25%;

2. Sikary: Fully switch to own brand, all in overseas market

Sikary is another "star" enterprise. After being acquired by Yinghe Technology in 2018, it also entered a stage of rapid development.

According to its official website, its e-cigarette business is mainly based on brand business, providing customers with e-cigarettes, cartridges, atomizers and other e-cigarette accessories, including disposable products and single-order products. In addition, some reports in 2024 also mentioned that Skol is preparing for nicotine bag business.

Since 2022, Sikary has fully switched to its own brand and has obtained TPD certification for access to the European e-cigarette market. It has successively expanded in the UK, Germany, Poland, Malaysia and other markets, and gained a good market share. In 2024, it submitted PMTA applications for multiple products in the US market, obtained STN numbers, obtained sales authorization for a period of time, and began to enter the US market.

In terms of products, Sikary's disposable products have achieved rapid growth. For example, the SKE Crystal Bar series launched in the UK has won great attention in the market and has become a "dark horse" that the capital market pays attention to in 2023. As countries increase their supervision of disposable products, Sikary has also upgraded its products, mainly for large-puff products, and is also actively deploying new markets.

According to reports from multiple foreign media websites, Sikary's SKE, Memers, Vfly and other brands have launched more than 20,000 large-puff disposable new products, mainly focusing on the US market. For example, the 25,000-puff SKE MG has been listed on the US e-cigarette retail website vapesourcing, priced at US$16.99, pre-installed with 22 ml of e-liquid (nicotine content is 5%), and supports three modes (soft, normal and enhanced).

The financial report mentioned that in 2024, the sales business team was expanded, and through advertising, social media interaction, ground promotion, large-scale exhibitions and other measures, it vigorously expanded markets such as North America and Southeast Asia, and gradually expanded the sales area. Driven by new product launches and vigorous sales expansion, in 2024, Skol's revenue was 3.19 billion yuan, a year-on-year decrease of about 4.5%; net profit was 1.29 billion yuan, a year-on-year increase of 28.28%.

3.ITSUWA: Insufficient overseas market expansion, product attractiveness needs to be improved

Among domestic e-cigarette OEM/ODM companies, ITSUWA also has impressive strength. After 2022, it also began to focus on overseas markets and its own brands. Its own brands are VOOM (and Vapesoul.

According to its 2024 interim report, revenue in the first half of 2024 fell 24% to 120 million yuan, and the net loss attributable to shareholders of the listed company was about 19.35 million yuan, a decrease of 184.42% from the same period last year. Due to e-cigarettes The market is highly competitive and both domestic and foreign sales revenue and gross profit margin have declined.

Among them, the operating income of the self-owned brand was about 39.22 million yuan, a decrease of 9.02% from the same period last year, and the gross profit margin was 25.91%, a decrease of 3.48% from the same period last year; the operating income of OEM/ODM was about 82 million yuan, a sharp decrease of 29.55% from the same period last year, and the gross profit margin was 28.21%, a decrease of 9.13% from the same period last year.

In terms of market distribution, due to the decrease in OEM orders, its domestic sales revenue in the first half of the year decreased compared with the same period last year. 76.50%, and the domestic gross profit margin decreased by 2.58% compared with the same period last year; in the overseas market, due to fierce competition among homogeneous products and unclear product differentiation, export revenue decreased by 23.39% compared with the same period last year, and export costs decreased by 13.92% compared with the same period last year.

It is reported that ITSUWA's research and development focuses on multi-cartridge electronic cigarettes and replaceable cartridge electronic cigarettes, and vigorously promotes its own brands VAPESOUL, VOOM, etc., and its products are positioned as high-end electronic cigarettes.

4. Jiayao Holdings: Atomization Transformation of Traditional Tobacco Suppliers

Jiayao Holdings is a Hong Kong-listed company. Previously, its entity company business was mainly cigarette packaging design and manufacturing. In 2024, it announced that it would focus its resources and energy on e-cigarette design, production and marketing. And sold a holding company engaged in cigarette packaging (Giant Harmony Limited).

In 2024, Jiayao Holdings' e-cigarette business revenue was 770 million yuan, a year-on-year increase of 0.2%. In terms of market, it mainly expands in Europe, America and Southeast Asia. Affected by the regulation of e-cigarettes in Southeast Asia, especially the tightening of policies in its fast-growing Philippine market, its e-cigarette business profit has declined.

In terms of products, Jiayao Holdings has focused on e-cigarette products with screens and environmentally friendly, biodegradable packaging to attract the attention of consumers who pursue individuality and environmental protection. Its products are mainly mid-to-high-end products, which are popular in some overseas markets.

In short, with advanced production capabilities, a solid supply chain network, competitive pricing strategies and a fast product innovation cycle, Chinese manufacturers are still the leaders in the field of electronic atomization. This comprehensive production capacity enables Chinese manufacturers to maintain their market leadership despite increasingly complex regulations and stricter quality standards in target markets.

At the same time, the ever-increasing compliance of overseas markets and highly homogenized product competition have brought difficulties to many manufacturers, resulting in a decline in revenue, profit and market share. With the help of diversified market strategies and personalized and differentiated product strategies, some manufacturers have found a way to break through and regain growth.

The true colors of heroes are revealed in the great waves, and we hope that more companies can get back on track.

Source:掌上决策参考

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