Former Juul Scientist & Nicotine Salt Inventor Targeting China's E-cigarette Market
COVID-19 and China
Xing Chenyue. Image credit: Myst Labs

The e-cigarette company MYST under Shenzhen Wuling Technology Co., Ltd.(深圳雾灵科技有限公司), made its first debut in the new product launch in Shenzhen on July 27, 2019. The newly released MYST P1, designed by the same team that had designed Apple mouse, is the world's first e-cigarette with a push-pull function.

It is quite satisfying for smokers to hear the "click" of lighter, which is quite a ritual in smoking according to the company's survey, and that's why MYST used this design to mimics the lighter‘s sound to provide a better experience for the conventional smokers. What's more important, the chief scientist of MYST Labs Xing Chenyue (邢晨悦) is the co-inventor of the nicotine salt (the dominating formulation for generating an inhalable aerosol in e-cigarettes worldwide) and leverages the technological advantages that no other e-cigarette startup has.

Before the MYST program, Xing worked in Juul, the world's biggest e-cigarette brand that accounts for 76% of the U.S. market share. Although being frequently accused of targeting schools, camps and youths programs, the company has been grown fast to a valuation of USD 37 billion. 

Now, the San Fransisco-based unicorn is teaming up with Chinese e-commerce giants and Alibaba to enter this yet to boom market in China.

"Juul’s technology is now three years old. I don’t think it’s made any other innovation on the liquid formulation since they launched." Xing commented."Based on my personal experience and observation, I believe that no matter in what industries, technology is the core competency to support its long-term development in the future."

The vaping market is blossoming in China with the largest number of smokers in the world. Compared with four investment deals last year, Chinese e-cigarette startups raised loads of venture capital in 2019 with more than 25 investment deal closed so far.

Despite the unsupported public opinion and unclear regulation, we will discuss this market that cannot be ignored.

What is new tobacco and how big is the market?

New tobacco is a relative concept of conventional tobacco. The traditional tobacco such as cigarettes, cigars, pipes are combustible and use real tobacco leaf in the products.

However, the over 600 °C burning would generate smoke that contains not only nicotine but also high levels of harmful chemicals. Therefore, dissolvable tobacco and nicotine patch were invented as replacements for people to quit smoking.

The not-burn characteristic of dissolvables and other products that contain nicotine were categorized in the sphere of new tobacco in the first place. But the two latecomers, e-cigarette and Heat-not-Burn (HnB) tobacco became the major representatives of new tobacco today.

In 1988, the first commercial HnB tobacco product made its appearance, a smokeless cigarette then described as difficult to use. After years of iteration, Philip Morris International launched IQOS, the best selling HnB tobacco since 2014 that made 5 million adults worldwide switched to this new tobacco. Just like the definition of HnB, IQOS heated tobacco leaves up to 350°C to delivery the true taste of burned tobacco, without combustion, fire, ash, or smoke.

In 2003, the first commercially successful e-cigarette was invented by a Chinese pharmacist Hon Lik. The invention was intended to be an alternative to smoking since Lik's father, a heavy smoker, died of lung cancer. Later in 2014, the abovementioned e-cig giant Juul sprung up the world with its attracting flavor and fashionable design.

According to Tianfeng Securities, global sales of new tobacco reached USD 27.74 billion in 2018, with sustained high-speed growth of 60.6% year-on-year. The HnB and e-cigarette accounted for USD 11.9 billion and USD 15.8 billion respectively. It is estimated that the global scale of new tobacco will jump to USD 37 billion in 2019.

The alarming popularity with teenagers

Among all new tobacco products, e-cigarette gained alarming popularity with teenagers. 

According to 2018 National Youth Tobacco Survey (NYTS), current middle and high school students increased drastically between 2017 and 2018, with over 3.6 million kids using e-cigarettes in 2018. The conventional tobacco and HnB that greatly resembles the taste of burning tobacco, are more attractive to chain smokers. The e-cigarette, though has been showing some cases in helping people to quit smoking, is far less appealing to smokers than to youth that never smoked before. Juul, for instance, comes in flavors such as fruit medley, mango, cool cucumber and creme brulee.

At the end of the day, flavored cigarettes would entice youth to smoke is a piece of unquestionable evidence compared with the scientific one whether e-cigarettes might be able to help conventional smokers to quit smoking.

“Just like kids who drink beer are turned off by the taste, we’re looking to create a nicotine formulation that kids won’t like and only veteran smokers will enjoy,”  Xing explained about MYST P1 that launched today. About the popularity Juul gained among teenagers, she added, "It was an accident that no one had ever expected." 

Regulations in China's e-cigarette market 

The tobacco industry in China is protected by the tobacco exclusive agency law (烟草专卖法) introduced and enforced by the State Tobacco Monopoly Administration(国家烟草专卖局).

For HnB, the sale and import were both banned in China's domestic market due to the concern of harming the traditional tobacco industry which contributes more than 6% of the state tax. However, the legislator did not stop the research and development of domestic and state-owned company China Tobacco. Currently, three companies under China Tobacco are exporting HnB products overseas. 

But for e-cigarette, the regulations will not be released until September or later this year.  

In 2006, the first Chinese e-cigarette Ru Yan (如烟) had sturred discussion on the unregulated area. The issue had become a hot potato that no regulatory was willing to risk getting burned.

China currently produces more than 95% of the world's e-cigarettes, while domestic consumption only accounts for less than 5% of the total.

With 350 million smokers that use combustible tobacco products, China is a major contender to become the largest e-cigarette market and regulations are also on the way.  

China is planning to regulate e-cigarettes in an attempt to stave off a new gateway addiction in what is already the world’s largest smoking population -- Daily News

The National Health Commission said this Monday that China is planning to establish legislation to supervise e-cigarettes as part of overall tobacco control efforts as use of the products increases among the youth. It is working with other related departments conducting research on e-cigarette supervision and planning to put it under supervision through legislative means.

Whether to treat it as tobacco products or as pharmaceutical products, the difference in e-cigarette legal definition will also reflect the future regulation power posed on these fast-growing startups.

Thousands of emerging e-cigarette companies are trying to squeeze in the yet to regulated market before the "final judgment".

However, without a profound understanding of the industry, the respect for the original intention of the e-cigarette product and the genuine care for smokers would lead this market to a state that "bad money drives good money out of the circulation".

Xing told EqualOcean that she saw the positive impact nicotine salt had brought to U.S. families and would love to bring the research spirit and technology back to improve the living status of Chinese smokers.

Though hold a wait-and-see attitude, the author does hope some superior e-cigarette companies in China would lead this market to a good direction to essentially assist in healthy smoking choice as technology has already brought us to an irreversible consumption trend.

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