E-cigarette Leading Brand RELX Relaxed with New Round of Funding

China's leading e-cigarette brand RELX (悦刻) completed a new round of fundraising on July 16,  the valuation of the company tripled last funding round to USD 2.4 billion, citing from Landong Consumption who familiar with the matter.

The e-cigarette startup was founded in January 2018 by a group of veterans in the business including members from Huawei, O'real, P&G and Uber. Six months after its inception, RELX received its Series A investment by Sequoia China and Source Code Captial with CNY 38 million or USD 5.53 million.

Electronic cigarettes, also known as e-cigarettes, or electronic nicotine delivery systems, are battery-operated devices that people use to inhale an aerosol, which typically contains nicotine, flavorings, and other chemicals. They can resemble traditional tobacco cigarettes, cigars, or pipes, or even everyday items like pens or USB memory sticks. 

E-cigarette together with Heat-not-Burn (HnB) tobacco represents two main categories of the new tobacco sector. 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. It is estimated that the global scale of new tobacco will jump to USD 37 billion in 2019.

As to the e-cigarette market in China, most of its consumers are not traditional smokers since the tobacco-flavored solutions that atomized into smoke have a huge difference with actual tobacco. Therefore, the original smokers are very unlikely to be pleased by the "new toy". The HnB, on the other hand, heats the cigarette bombs that contain tobacco leaf. It restored the pure taste of traditional cigarettes to the greatest extent and is easier to be accepted by traditional tobacco consumers.

However, the China's e-cigarette market has been showing great potential in this year's 618 shopping festival -- a unique promotion day similar to Chinese Single's Day shopping festival started by e-commerce giants Alibaba, JD.com and so on.

In the JD 618 shopping festival market snapshot, the turnover of e-cigarettes on JD.com increased 5.6 times over last year and 2.1 times over Single's Day performance six months ago. RELX, FLOW (福禄), MOTI (魔笛) rank top three in sales of this emerging sector respectively.

In China, the tobacco industry 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) as a monopoly industry. The sale and import of HnB were banned in China's domestic market, and the number of cigarette bombs used in HnB is also limited. However, it 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. 

With more than 350 million smoking population in the country, we would foresee the market once HnB is allowed to sale in China.