Specialist
Former manager at Beijing Qiwu Technology Co Ltd (Yooz)
Agenda
- China’s e-cigarette market dynamics, regulatory policies and trends, regulatory measures in the US and Europe, plus possibilities for China to adopt these measures and what-if analysis
- Market structure and competition, plus market share, development strategies and customer profile of leading players including Relx (NYSE: RLX), Yooz and Moti
- Yooz’s H1 2021 sales performance – retail sales performance, product influence, pricing structure, promotion and marketing strategies
- Sales channel development, dynamics and subsidy policies, franchise system updates, cooperation models with franchisees, profit and cost structure
Questions
1.
The national authorities publicly solicited opinions on the Decision on Amending the Implementation Regulations of the Tobacco Monopoly Law of the People’s Republic of China (Draft for Solicitation of Comments) this April. The draft for comments proposes that new tobacco products such as e-cigarettes shall be implemented with reference to the relevant regulations on cigarettes in the Implementing Regulations. There are not many policies officially issued as of now, but it seems that the e-cigarette industry will also enter an era of licensed operations and be under similar taxation regulations to the ones implemented on the traditional cigarette industry. What do you think will the policies, regulations or measures be? When do you think the official policies will be issued at the soonest?
2.
So the Chinese government will probably issue policies to limit the nicotine content or ban certain flavoured e-cigarettes. How would that impact players in the industry? Would that completely change the market?
3.
How could brands differentiate with each other if they can only sell the same flavoured e-cigarettes in the future?
4.
You have just mentioned that brands need to develop and hold core technologies. It seems that most leading brands work with Smoore as their OEM. What are small brands’ advantages if they manage product
R&D on their own?
5.
According to the statistics published by the Electronic Cigarette Industry Committee in 2020, the market size of e-cigarettes in China has reached over RMB 14bn with an over 30% YoY increase. What could be the e cigarette market size and growth rate in the medium-and-long term after the national policies are issued?
6.
Although the potential regulations and policies were exposed in H1 2021, the number of newly registered enterprises doing business related to e-cigarettes did not drop and even increased by over 900% YoY. Could you talk about the current competitive landscape? Have you noticed any brands that have delivered ideal performance in the past six months or gained a bigger market share? Which brands failed to perform as well?
7.
How much would the market share growth of Moti and Boulder be resulted from the overall expansion of the entire e-cigarette market size and their strategies to snatch market share from other brands respectively?
8.
Could you further introduce the wrong moves Relx and Yooz have taken respectively?
9.
As in other industries, instead of monopolies, the national government encourages fair development and fair competition in the e-cigarette industry. Relx, as the industry leader, has almost monopolised the market. Will it face significant risks in the future? Will the national government issue more other policies to regulate the industry or drive fair development in the industry?
10.
Considering the policies soon about to be issued and implemented, what are different brands’ development focuses?
11.
Let’s talk about Yooz’s performance in H1 2021 before discussing channels. What have been its business scales and shipments in recent years? How well did it perform in H1?
12.
You said earlier that brands have shifted their focus to distributors’ operations, hoping the latter can further enhance their profitability. Such being the case, how come Yooz is still giving subsidies for opening new stores?
13.
BYD Electronics also develops atomisers. Do you have any information to share with us with regard to its product acceptance and customer development?
14.
How much energy, time and capital would it take for BYD Electronics to develop as good atomisers as those of Smoore?
15.
Smoore’s shipment in the Chinese market was large in H1 2021. Why did it continue to increase its shipment despite uncertain regulatory policies?
16.
Yooz opened 1,000 stores in October 2020 and 2,500 a month later. How many stores does Yooz open in China at present? What about its store types and sales channels?
17.
What about Yooz’s current market expansion strategies? Is it still seeking to cooperate with distributors?
18.
What about Yooz’s cooperation models with distributors as well as their respective responsibilities and obligations?
19.
You said earlier that Yooz once established a WeChat business department before and substantially disrupted its pricing system. To what extent was the pricing system disrupted? What do you think was the problem?
20.
What about the overall performance of Yooz’s distributors in some regions and the economics of a single store?
21.
What about the costs and gross profit of Yooz’s distributors compared with those of Relx’s?
22.
Among Yooz’s stores, what about the number of stores that break even, make profits and lose money?
23.
What strategies does Yooz take to help stores that lose money? You said that brands focus on assisting stores in operations. What specific solutions do they develop?
24.
Such examples have been reported. In fact, distributors don’t gain profit because they can’t sell these products to maintain store costs. If so, would they better directly close their stores?
25.
Could you talk about Relx’s client profile?
26.
One way to improve a store’s performance is to develop new customers. What measures do distributors take to win new customers?
27.
Could you tell us about Yooz’s franchisee system? How many are small franchisees and how many are large distributors that are in charge of a regional market?
28.
Could you talk about distributors’ early-stage investment in opening one store? How long is the payback period?
29.
What else do you want to tell potential investors of the industry or Yooz?
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