1. China Vapor Market Stand Point Vapor Taking New Tobacco Further.
SPV EU Operation Manager Jingwen LUO
June
Taking New Tobacco Further.

2. Table of Contents 1. Market Situation 2. Actual Distribution Channels
General Market Overview
Smoking Control in Public
2. Actual Distribution Channels
Online Channels
Offline Retail shop
3. Existing products
4. Our actions
Qiaogu
Marketing Support

3. MARKET SITUATION Current situation Awareness Opportunity Policy
Traditional smokers
350 million smokers (WHO, 2010)
Chinese tobacco market grows fast (7.5% 2014)
Tobacco tax contribution is 156b USD(China Tax report 2013)
Just one brand”Chunghua” alone sale revenue is 25b USD
Opportunity
Awareness
The awareness of cessation is poor and little support had been given to the smokers attempted to quit.
Electronic cigarette has not obtained any official endorsement in China yet.
Weaknesses
Policy
State Tobacco Monopoly administrative office manage the tobacco industry from seeds, plant, manufacturing to sale.
From 2015 with the stepping up for new strong government, China is implementing the most comprehensive smoking control campaign in the history.
China is issuing a law to put cessation drug into the medi-care system.
Shenzhen Authorities will promote smoking cessation drugs into social security
Support

4. MARKET SITUATION
Smoking control campaign by our First Lady and Bill Gates in China in 2014
Our First Lady participate to the smoking comtrol campain with Bill Gates, who has his “bill and Melidan Foundation” for quit smoking.

5. MARKET SITUATION
Smoking control campaign in the public

6. MARKET SITUATION
Smoking control campaign in the public

7. MARKET SITUATION
Since 1st June this year, Beijing Municipal Commission announced to tighten rules on the smoking control plan, during 3 months smokers in public areas in Beijing will be fined.

8. Actual Domestic Channels

9. CHINA VAPOR MARKET DOMESTIC CHANNELS Mainly Online! ONLINE SHOP
With 51.7% market share, Taobao has become the biggest online portal( in China, and Tmall, JD shop, “1”shop as following. They are the major B2C online retailers.
SPV has established a long-term strategic partnership with them
The expected turnover on taobao.com for ecig category in year 2017 is 10b rmb(1.6bUSD)---according to head of ecig division in the ecommerce portal. June 2015
The e-cig channels are easy to access, because of the concentration platform for the consumers: online and retail.
Till the end of 2014,Taobao registered members are over 1.2 billions as daily active users, and the online products reached more than 10 billions, Total transactions of Taobao and Tmall exceeded to 1.5 trillion RMB

10. CHINA VAPOR MARKET TAOBAO Online Search Data Analysis (e-cig)
The search frequency on ecig of Feb 2015 was low because of Chinese New year, the ecig sale was basically flat.
The index of search frequency for last seven days is 17.3%, compared with the same period of 2014 increased to 34.9%.

11. CHINA VAPOR MARKET TAOBAO Online Research Data Analysis (e-cig)
By Region
The research shows that end consumers are mainly in Northern China(Heilongjiang Province ex.) and Shanghai, both in 2014 and 2015

12. CHINA VAPOR MARKET More Demographic Research Data
Compared to 2014, More feminine consumers increase, the main market is still for the men, 68% compared to 32% for women.
The prevalence is highest among those 18 to 24 years of age, and lowest among those 40 to 49 years of age for e-cig.
For traditional tobacco, (52.9% of men and 2.4% of women) were current smokers. - Li, Hsia, & YANG, 2011.
The main consumption groups who buy the e-cig are digital lovers, outdoor, housewife, fashion hypsters
The reason for vaping is to quit smoking, mostly the adults offer the e-cig to their parents who are the traditional tobacco consumers in China.

13. CHINA VAPOR MARKET
TAOBAO Online Search Data Analysis (Oral Nicotine Product)
The index of search frequency for last seven days is 38.3%, compared with the same period of 2014 is 60.1%.

14. CHINA VAPOR MARKET By Region
TAOBAO Online Research Data Analysis (Oral Nicotine Product)
By Region
The top cities who research and like the product the most is Shanghai, Beijing and Tianjin. In 2015, some cities in the south of China start to order, like Shantou, in Canton.

15. CHINA VAPOR MARKET
More Demographic Research Data (Oral Nicotine product)
Mostly masculine consumers look for this product, 77% compared to 23% for women
The main consumers who buy the products are IT lover, housewife, outdoor
The data from Baidu Index, shows less search of this kind of product in China

16. CHINA VAPOR MARKET One paradigm OFFLINE MARKET
Till present, we note according to China Vapor shop Alliance that
150 e-cig operators totally
Spread in 25 provinces in China
Independent shops and Chains

17. CHINA VAPOR MARKET
OFFLINE MARKET
Vapor shop in China

18. CHINA VAPOR MARKET OFFLINE MARKET Vapor shop in China
“Vapor Bar”, 1st vapor shop in Shenzhen in 2015

19. CHINA VAPOR MARKET
OFFLINE MARKET
Vapor shop in China

20. CHINA VAPOR MARKET OFFLINE MARKET
Shenzhen will launch the first experience center on 20th June

21. CHINA VAPOR MARKET
OFFLINE MARKET
Local Vapor Event

22. Existing Products

23. CHINA VAPOR MARKET Current different types on the market:
Disposable
Rechargeable
VTM
Top search online:
Products like Disposable is a starting product, rechargeable e-cig are already on the market since a while,
Doulton is the brand which has the most online research, the price is 122 RMB by average(20USD)
There are total 16 online shops annual revenue could surpass 1.6m USD/y (data at in Aug 2014), the largest one reached appox. 5mUSD/y, claimed pieces/month sold.
The major brands on the market are Chinese
VTM is the most popular e-cig product in Chinese market, and disposable has 20% of the market, according to China Tobacco.

24. CHINA VAPOR MARKET Second search online: Third search online:
3rd: Enkang who promotes the product as a gift to father for the marketing, and the price is 215 RMB (35 USD) by average

25. CHINA VAPOR MARKET
VTM products start to have an important market share in Chinese market, the average price is 349 RMB(appox. USD55)
Nicorette, top online research oral tobacco product

26. Future deployment of SPV beside its own brand operation in China

27. What SPV is doing? What SPV had prepared for future
Our own ecommerce portal
QIAOGU PROJECT
Qiaogu is committed to become a professional O2O(Online to Online consumers) operating
9 digits RMB investment
It’s a platform for the community retail stores and consumer services.
With the background of developing the channel system many years, Qiaogu has signed the partnership with over thousands of retailers
It covers 3500 convenience stores evenly across China now (due june )
APP focuses on the new experience GPS for the convenience store

28. More product coverage of new tobacco
SNUS Product
- Shanghai Tobacco has developed jointly the snus, and other oral tobacco products with SPV. SPV is the international agent to distribute all these products.
- Shanghai new tobacco research established on 6th of June The production lines will be ready before the end of year.
June 6th, Shanghai new tobacco research institute was formally established. This marks the new stage of development of new tobacco products in the industry. The strategic decision of developing new tobacco products is the major plan for China tobacco industry, and the long-term development for the future.

29. CHINA VAPOR MARKET
Summary
1. Control toward the domestic e-cig sale might be effective in the next two month.
2. The content of nicotine will be the main reference for control in China, nicotine might be put into the monopoly system
3.The future sale of e-cig device perhaps will be exempted from the monopoly.
4.Licensing might be the main approach for vapor product release.

30. Thank you SPV International Business Development Division Customer Service Hotline: (for China and International Customers)