Recently, British American Tobacco (BAT) announced that it would increase the sales revenue ratio of its heat-not-burn device “Glo” in Korean convenience stores from 6% to 7.5% to improve retailers’ profits and consolidate cooperative relationships. This adjustment marks the trend of redistribution of channel benefits in the e-cigarette industry, and has also attracted the attention of upstream and downstream companies in the industry chain. As an e-cigarette brand with 10 years of factory experience, VEEHOO has proposed a multi-dimensional analysis and response strategy for this policy and industry trend.
This adjustment by British American Tobacco is the third increase in the revenue ratio of convenience stores in the industry after Korea Tobacco and Philip Morris International. Previously, convenience stores faced operating pressure due to low sales profits of HTP equipment. This adjustment aims to ease channel conflicts and enhance cooperation stickiness by increasing the profit ratio of retailers (from 6% to 7.5%).
The 2024 South Korean National Assembly hearing exposed the unfair distribution of profits in the HTP equipment channel, prompting companies to actively optimize their profit structure. At the same time, with the intensified competition in the HTP market (such as the impact of new IQOS products and the squeeze of disposable atomization products in the market), increasing channel revenue has also become a key means for brands to compete for terminal resources.
As a brand that has been deeply involved in the field of e-cigarette manufacturing for 10 years, VEEHOO evaluates this industry change from the following perspectives:
VEEHOO has maintained its supply chain cost advantage for a long time with its large-scale production and centralized procurement strategy. For example, by coordinating global raw material procurement needs and optimizing logistics efficiency, its unit production cost is lower than the industry average. This ability enables it to maintain the price competitiveness of terminal products when channel profits are raised.
VEEHOO believes that the adjustment of channel profits reflects the importance that brand owners attach to the value of the retail end. It has tried a dynamic profit distribution mechanism in the Chinese and Southeast Asian markets, such as floating the rebate ratio according to regional sales performance to stimulate high-potential markets. In the future, VEEHOO may learn from the strategy of British American Tobacco and explore a deep cooperation model with convenience stores under the premise of compliance.
Facing the technological competition of HTP devices (such as the heating technology upgrade of British American Tobacco Glo HyperX2), VEEHOO emphasizes atomization technology innovation as the core, focusing on mature technologies such as ceramic cores and low-temperature atomization, while developing differentiated products that comply with regional regulations, such as CBD atomization equipment for the European market.
British American Tobacco, VEEHOO and other companies need to deal with the tightening of e-cigarette regulations in various countries (such as the US FDA’s restrictions on disposable products). VEEHOO has passed ISO certification and PMTA pre-examination, and plans to increase investment in compliant markets such as the EU and the UK in 2025.
The per capita e-cigarette consumption in mature markets such as the UK has reached US$67.25, while emerging markets such as Africa and Southeast Asia still have room for penetration improvement. VEEHOO plans to reduce logistics costs and respond quickly to demand through localized production and channel cooperation.
British American Tobacco’s channel profit adjustment is not only a microcosm of industry competition, but also provides a model for e-cigarette brands to optimize the supply chain and channel relationship. For VEEHOO, relying on the cost advantage of the manufacturing end, strengthening the technical barriers, and dynamically adapting the channel policy will be the key to its continued leadership in both HTP and atomization tracks.
Tags: heat-not-burn equipment, HTP equipment, British American Tobacco, veehoo vape