The Controversy Surrounding SnowPlus' Production Capacity Quota

New regulations on e-cigarette regulation are gradually being implemented, promoting the industry's move towards a more organized development in areas such as taste, sales, and production. In the past, the industry's expansion relied heavily on capital, but with the new regulations in place, production companies are finding their capacity limited due to the enforcement of production capacity approval systems. As a result, the monitoring and approval of capacity is becoming increasingly critical.

Sudden Rise

There are doubts surrounding Xuejia's production capacity quota, and they are not unfounded. According to relevant regulations, there are three indicators that are crucial when calculating the approved production scale for e-cigarette companies: the nominal capacity of production equipment, the average of actual sales over the past three years, and the industry's utilization rate of production equipment.

In other words, production capacity quotas are mainly linked to actual sales and equipment capacity. But can Xu Jia's actual sales and production capacity really reach the second-highest level in the industry?

In comparison to the largest player in the industry, Yooz, the recent allocation of production quota for Smokeless Tech is set at 24% of Yooz's pod quantity, 50% of Yooz's stick quantity, and 16% of Yooz's disposable e-cigarette quantity. Yooz had a revenue of 8.52 billion yuan in 2021, and with products priced similarly among competitors, it is estimated that Smokeless Tech would need a revenue of 2 billion yuan to match their allocated production quota. However, industry experts point out that Smokeless Tech's revenue in 2021 was only about 500 million yuan, four times lower than what is needed to match the quota. This has sparked considerable discussion within the e-cigarette industry.

Never mind the gap between SnowPlus and Yooke, even when compared to well-known e-cigarette brands such as Vaporesso, Smok, Lost Vape, and Uwell, SnowPlus still lags behind in terms of market share. However, SnowPlus has caught up in terms of production capacity, exceeding these brands by a large margin, which is truly remarkable.

Despite a low ranking in terms of market share, Snowplus has unexpectedly secured the second position in production quotas, surpassing its competitors. This sudden rise to success may seem unlikely given the current regulatory climate that has caused most companies to scale back or suspend growth in production and store expansion. While it remains uncertain whether Snowplus can achieve significant growth in production and sales in the short term, the possibility seems far-fetched given the industry's current state of transition.

Overall, the skepticism in the industry regarding SnowPlus' production capacity quota primarily stems from its relatively low status within the industry. As a brand that does not have a significant advantage, it is surprising that it has suddenly become the second largest electronic cigarette brand. This kind of rapid rise to success seems unlikely under any circumstances.

The situation is highly turbulent.

It is worth noting that the current questioning of Snow Beer's production capacity quota is not the first controversy that the company has faced. Looking back at Snow Beer's relatively short three-year development period, from sales to branding, the company has been continuously embroiled in controversy.

In terms of sales, Xuejia publicly released sales data in 2019, stating that sales increased from 10,000 units per month to 800,000 units in a period of four months, marking an 80-fold growth. However, this data was met with skepticism from various industry experts who questioned its authenticity and reliability.

At the time, SnowPlus was caught in a sales controversy. One important reason for this was the lack of third-party data reports to support their claims. In addition, SnowPlus had an aggressive marketing style, often referring to themselves as a first-tier player. This made it difficult for the market to believe in such a young player.

Additionally, Xuejia was once questioned by consumers for the sales data on the e-commerce platform. At the time, the electronic cigarette industry was highly competitive, and some players in the industry used special means to artificially inflate sales figures in order to improve their platform recommendation weight.

Regarding the brand, Xuejia has faced criticism from international media due to its brand background. Xuejia previously claimed that its research and development team was from overseas company Reverie Lab, but it was later discovered by the media that Reverie Lab is actually a biotechnology company that has no involvement in e-cigarette vaporization, e-liquid pod technology or any products related to Xuejia's brand. Additionally, there is no information on Reverie Lab's official website that pertains to either e-cigarettes or the Xuejia brand.

In terms of products, Xuejia once released the "Electronic Coffee", which can atomize coffee containing extract for consumers to inhale. The release of Electronic Coffee immediately sparked a lot of questions: Does it contain the controlled substance caffeine? Is there any unknown health risks associated with inhaling coffee mist? Although Xuejia has made public responses, not all doubts have been dispelled.

Over the years, Xue Jia (SnowPlus) has faced numerous controversies and criticisms regarding its sales, products, and brand. Based on common knowledge, the reason why Xue Jia has been susceptible to attracting skepticism from various parties is due in part to its failure to timely disclose more high credibility information and data to address the public's doubts. Additionally, Xue Jia's flamboyant marketing style may have also contributed to overlooking many advertising details, causing confusion and trouble for outsiders.

Possible translation: Relying on quotas may be insufficient for promotion.

Putting aside past doubts, when it comes to the recent controversy surrounding SnowPlus' production capacity quotas, even if SnowPlus were to receive such a large quota, is it possible for the market to completely absorb it?

According to official announcements, SNOWPLUS has business operations in dozens of foreign countries and regions. However, for this particular instance, SNOWPLUS' production capacity allocation license is for the domestic market. This means that the pod products produced by SNOWPLUS using the allocated production capacity can only be sold and distributed within the domestic market.

This raises two key issues. Firstly, as mentioned earlier, Xiajia's market share is relatively low, making it difficult to fully convert such a large production capacity quota into actual sales.

In theory, Xuejia needs to open more offline stores and bring in more franchisees on a large scale in order to increase product sales and divide up excess production capacity. However, the current macro environment of the e-cigarette industry does not allow for such a reverse expansion to occur. One reason is that during the regulatory transition period, many stores are still in the process of applying for licenses and are in a wait-and-see mode. Secondly, brands also need to reserve more time for R&D and strategic planning after the regulations are fully implemented, and will not blindly expand.

The second issue is whether or not SnowPlus will resort to unconventional means to dispose of its excess production capacity, such as outsourcing production for other brands or engaging in capacity trading, if it fails to digest its production quotas. However, such actions would cross regulatory boundaries and disrupt the orderly development of the electronic cigarette industry.

Therefore, although Xuejia has obtained production capacity quotas far beyond industry recognition, there are still considerable obstacles to fully digesting all production capacity. While production capacity quotas are crucial to e-cigarette players, the size of the quotas is dynamically adjusted, and if Xuejia's sales cannot keep up with the quotas, their quotas may be easily reduced in the future.

Currently, criticisms surrounding the excessive production capacity quota for Xuejia are unlikely to disappear in the short term. The new regulations indicate that market entities who behave dishonestly will be closely monitored and publicly exposed on the top of the credit disclosure system.

Therefore, regarding the significant questioning and controversy sparked by Xuejia this time, regulatory authorities may need to further investigate more details and conduct a comprehensive investigation of its production capacity.

Looking ahead in the post-regulatory era, the true determinant of power in the e-cigarette player market will undoubtedly be consumer and retailer approval, as well as continuous product innovation. Only by achieving these goals can a player truly succeed.

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