High Profit and Huge Potential? The Hidden Champion Categories in the Market.

Vapes are a special category of consumer goods

In 2022, China implemented new standards that explicitly banned the sale of fruit-flavored vapes. In the same year, taxes on vapes were levied at the same rate as tobacco products. The industry ecosystem was rapidly transformed overnight. The company behind RELX, the so-called "first vape stock" in China, was Fogcore Technology, which once dominated the market with a 74% market share. However, in the first half of 2023, its stock price plummeted by as much as 95%.

Expanding overseas became a mandatory option for vape brands. In 2021, China's vape exports saw a dramatic surge, with exports increasing by 180% year-on-year. According to data from China's General Administration of Customs, in 2022, the total export value of China's vape products reached 66.286 billion yuan. In 2023, exports rose to 77.954 billion yuan, reflecting a 17.6% year-on-year growth.

Data shows that more than 95% of the world’s vapes are manufactured in China, with 70% of these coming from Shenzhen. In the leading markets for vape consumption, Chinese brands occupy a dominant share.

Vape brands under companies like iMiracle, SMOORE, RELX, GIAE Technology, City Uvape, and AVP are firmly established at the top of vape markets in Europe, the U.S., Southeast Asia, and other countries.

At the same time, vapes have a fast-moving consumer goods (FMCG) nature, with rapid product updates and strong innovation. Some have compared vapes to “bubble tea,” which can find new growth opportunities through innovation in design and flavor. This has allowed new brands and products to always find opportunities to differentiate themselves. If _{Flum Vape} keeps you going, this new product will keep you hooked. 

However, as a sensitive category, vapes are significantly affected by policy fluctuations. Regulations surrounding vapes are constantly being adjusted in various countries, and compliance issues have become a major challenge for vape companies expanding overseas, along with multiple logistical, payment, and marketing difficulties.

What are the new trends in the overseas expansion of vapes? What challenges are commonly faced during this process?

Disposable Vapes: From Boom to Ban

Different countries have different regulations and certification requirements for importing vapes. Overall, European and American markets tend to have a relatively open attitude toward vapes and are the largest export markets for vape products.

According to data from Shenzhen Customs cited by Cinda Securities, in January and February of 2023, the top five countries and regions for vape exports from Shenzhen were the U.S., the European Union, the U.K., Russia, and ASEAN, accounting for 32%, 18%, 14%, 9%, and 6%, respectively.

The U.K. and the U.S. are undisputed major consumers of vapes. According to Euromonitor, in 2022, the global retail value of vapes was around $18.9 billion. The retail value of vapes in the U.K. was approximately £2.03 billion (about $2.58 billion), with a year-on-year growth rate of 44%. In the U.S., retail sales of vapes were about $7.8 billion, with a year-on-year decline of 8%.

In both Europe and the U.S., vapes are often seen as a tool for smoking cessation. The U.K. is one of the most proactive countries regarding vapes. In 2019, the U.K. set a goal of becoming smoke-free by 2030, aiming to reduce the smoking rate to below 5%. In October 2021, the U.K. announced that vapes would be considered a legal medical product to help smokers quit. This move, driven by the U.K., led to rapid global growth in the vape market.

Vapes are mainly divided into four types: open-system vapes, pod-based vapes, disposable vapes, and heated tobacco products (HNB).

Open-system vapes are larger and allow users to refill with e-liquid, making them reusable and cheaper. Pod-based vapes consist of a device and a cartridge that needs to be replaced, with the device being reusable and requiring charging. Disposable vapes, on the other hand, are discarded after the e-liquid is used up and are not reusable. HNB devices heat tobacco instead of burning it.

In the past two years, disposable vapes have seen explosive growth, quickly taking market share from open-system and pod-based vapes. Data shows that in the U.K., the sales of disposable vapes in 2022 grew by 1,116.9% year-on-year, reaching $1.08 billion. The market share of disposable vapes rose from 0.6% in 2020 to 43.1% in 2022. In the U.S., the sales share of disposable vapes also rose from 24.7% in 2020 to 51.8% in 2022.

The market for disposable vapes is largely dominated by Chinese brands. Shenzhen-based iMiracle is the biggest winner. iMiracle’s brands, Elf Bar and Lost Mary, rapidly rose to the top of the U.K. market for disposable vapes and are ranked first in several countries.

"When people think of disposable vapes, they think of iMiracle," said Fifi, the Director of the Overseas Division at Vape industry media YISE. According to Statista, Elf Bar’s sales in the U.K. exceeded £654 million ($818 million) in 2023. According to VapeClub, of the 50 most popular disposable vape products in the U.K., 47 were from iMiracle’s brands.

In 2021, the leading vape brands in the U.K. were JUUL, Blu, and Logic, all of which primarily offered pod-based products. By 2022, the top brands in terms of sales were Elf Bar, Lost Mary, Vuse Go, Crystal Bar, and Elux, all of which focused on disposable vapes. Notably, JUUL and Logic are both overseas brands manufactured by Chinese companies, while disposable vapes are mostly Chinese-made.

Compared to pod-based and open-system vapes, disposable vapes are more affordable, come in a wider variety of flavors, and quickly replaced the other two in market share. However, disposable vapes have long been controversial due to environmental concerns. They contain disposable plastic, nicotine, and batteries, and the rapid consumption rate can cause serious environmental problems. There are also concerns about the appeal of disposable vapes to minors, leading to increased risks of addiction. U.K. media reports state that in the past two years, the use of disposable vapes by minors aged 11 to 17 has increased nearly ninefold.

In a recent update, the U.K. announced that disposable vapes will be officially banned starting January 29, 2024. Following this news, the stock price of SMOORE International, a leading provider of vaping solutions, fell by more than 4%.

This ban will likely lead to another reshuffling of the vape market, with pod-based and open-system vapes potentially regaining dominance.

Fifi revealed that brands had already prepared for policy changes. Since 2023, there have been rumors about the potential ban of disposable vapes in the U.K. To adapt to market changes, iMiracle launched pod-based products in the second half of 2023 and began selling them in Germany.

From open-system to pod-based, and then to disposable vapes, the rapid product evolution reflects a key characteristic of the vape category: the product life cycle is short and highly sensitive to changes in market conditions. Leading companies are quick to adapt to market trends and adjust their product offerings, while new brands can rapidly gain traction by responding to market demands, but they also face the risk of "rapid rise and rapid fall."

Three Major Challenges: Logistics, Payment, and Marketing

As a sensitive category, compliance is an unavoidable issue for vape companies expanding overseas.

Recently, major countries have been tightening their regulations on vapes. In the U.S., for example, companies must submit a Premarket Tobacco Application (PMTA) to the FDA to prove that their vape products “protect public health” or serve as a tobacco alternative. Since 2020, the FDA has received 26 million PMTA applications, rejecting 99% of them, and only 23 tobacco-flavored vape products have received marketing orders (MGO).

Despite these regulatory hurdles, there are still numerous unapproved products on the U.S. market. Since 2023, the FDA has frequently issued import alerts and warning letters to vape companies, targeting “illegal” vapes. On July 27, 2023, the FDA expanded its warning to distributors and retailers, sending warning letters to three distributors for selling and/or distributing multiple vape products, including Elf Bar/EB Design, Esco Bars, and Puff Max—brands that include iMiracle’s products.

As each country has its own regulations, vape companies must understand the specific policies of each market to operate compliantly. In addition to compliance, vape sellers face three major challenges: logistics, payment, and marketing.

In terms of logistics, vape products are considered sensitive goods and are classified as tobacco-related prohibited items in international shipping. There are limited logistics channels capable of handling vape shipments. "Different countries have different restrictions on the import and export of e-cigarettes, and some logistics companies may be able to ship to the U.S., but not to the Middle East. Therefore, you need to cooperate with companies that have different shipping capabilities," said Wendy, the market manager at Nox Juxing.

On the payment side, many overseas banks and online platforms do not support vape industry accounts, making it difficult for vape companies to register and open accounts.

In terms of marketing, vapes face significant advertising restrictions in most countries, which limit their ability to promote products on mainstream media platforms. Online marketing and traffic acquisition are also heavily restricted. As a result, many vape brands rely on independent websites, search engines, social media, influencer partnerships, and affiliate marketing to drive traffic.

For example, on Instagram, thousands of influencers are often involved in promoting well-known vape brands.