Pride (Kuanzhai) of China Tobacco Sichuan Industrial Co., Ltd.
As a result of technological upgrades and brand innovations over the past two years, five increasingly distinct major trends dominate the Chinese market.
By Tobacco China Online
Innovation of Chinese cigarette brands is not only a fundamental factor for sustainable development of China’s tobacco industry, but is also a premise for Chinese brands to realistically conquer international markets.
Popularization of Brands
The greatest change in the domestic tobacco market over the past two or three years is that an increasing number of smokers are consuming more of the same products and on more occasions. In particular, such best-sellers as hard-packs Chunghwa and Furongwang, soft-package Yuxi, the new version of Liqun, and the purple Yunnan have won greater market shares and favor from consumers with their multitude of flavors and fine quality.
So far, this change has been very straightforward.
First of all, the threshold to qualify as a mainstream cigarette brand keeps getting higher. Without an annual output and sales volume of 500,000 cases (25 billion cigarettes) or higher, a brand in China cannot be considered as mainstream. This is a clear indication that more and more consumers like or choose large national-level cigarette brands.
And secondly, those brands that have been artificially inflated will face the fate of being rejected or phased out. In the past, unintelligible or rule-bending advertising always stemmed from the development of some cigarette brands. Today, such malpractice is becoming increasingly risky. Instead, brands tend to become more prudent and serious in terms of conceptual development and in trying to address people’s needs and interests rather than stubbornly impose something on consumers.
In the future, natural brand mottos such as Liqun’s “Let the soul make a tour” (from China Tobacco Zhejiang Industrial) which features brand development that is closer to life, more vivid and more natural will become the mainstream. In particular, online technologies will become more sophisticated and popular, which will enable ways and means for establishing links between brands and consumers that are more diversified, and which will provide greater opportunities to transmit brand values and make it easier.
Mount Tai (Confucian Slim Cigarettes) of China Tobacco Shandong Industrial Co., Ltd.
Mainstreaming of Slim Cigarettes
Slim cigarettes have been the greatest highlight of Chinese cigarette products over the past two years. Although sold in relatively small quantities and on a small scale, slim cigarettes have become a growing marketing trend, with spectacular sales growth momentum. Even when other tobacco products generally see sales declines, slim cigarettes still grow and make inroads into markets. As a result of great promotional efforts by the tobacco industry, slim cigarettes have received the “green light” from policy-makers, in the interest of their further development.
In 2015, there were 67 specifications of slim cigarette products in China, with commercial sales volume reaching 709,000 cases (35.45 billion cigarettes), up a remarkable 153.6% year-on-year, and with commercial sales value reaching RMB29 billion (US$4.46 billion), up 147% from the same period the previous year. It is therefore obvious that slim cigarettes make up a burgeoning new market with active growth and broad prospects for further development.
In January 2016, the slim cigarette segment continued its momentum with the number of specifications on sale increasing to 77, and commercial sales volume reaching 131,000 cases (6.55 billion cigarettes), up 94.3% year-on-year, and with commercial sales value reaching RMB5.9 billion (US$907.7 million), up 103.5% year-on-year.
Under the 13th Five-Year Plan (2016-2020), slim cigarettes will account for over 8% of the total cigarette sales, with conservatively estimated annual sales volume expected to reach between 3.5 million cases (175 billion cigarettes) and 4 million cases (200 billion cigarettes). This means that in the next five years, beginning in January 2016, the market sales of slim cigarettes in China will increase by 600,000-700,000 cases (30-45 billion cigarettes) annually from the 2015 level of 700,000 cases.
Although sharp growth in sales volume is a clear indicator that slim cigarettes are becoming a mainstream in China, the tobacco industry needs to develop a number of slim cigarette specifications with the potential to create big competitive brands, in order to realize sustainable development, including the serial slim cigarette products of the Jinling 12 Beauties brand manufactured by Nanjing Cigarette Factory in China’s Jiangsu Province. It is still unclear whether Jinling 12 Beauties will be able to operate as a relatively independent series of products, becoming a complete line of slim cigarettes and living up to their innovative potential.
General Application of Crushball Technology
The growing sophistication of technology and the resulting reduction of costs will enable cigarettes with flavor capsules to be universally accepted and popularized within a relatively short period. At a time when the concept of crushball technology was becoming popular in parts of the world, Chinese cigarette brands swiftly followed suit and make localized improvement to the technology in merely one or two years, which shows the increasing capacity for innovation and responsiveness of Chinese cigarette brands, and which also contributed to greatly enriching the variety of brands.
At the 2016 national tobacco work conference held in Beijing in January, cigarette products using crushball technology were all the rage. Speaking at the meeting, director general Ling Chengxing of the State Tobacco Monopoly Administration (STMA) – the regulator of China’s tobacco industry – instructed the tobacco industry to adhere to the policy of supporting product innovation and remember the importance of technological innovation when adding flavor capsules into cigarettes, promote upgraded and updated cigarette products, and predicted a possible shift from the application of the crushball technology on a small scale in the initial stage to large-scale generous application of the technology in future.
Presently, following the use of crushball technology in traditional standard-sized cigarettes, new forms of additional flavor capsules in slim cigarettes and short cigarettes, production of cigarettes with twin flavor capsules, etc. have become highly effective. In particular, continued enrichment of categories of flavorings and essences makes the concept of crushball more vivid and diversified, and the application in cigarette production is gradually evolving from a hypothetical concept to a new comprehensive experience for the sense of smell and enjoyment.
Today, many cigarette brands have taken up the technology in their new product development. In the second half of 2015, China Tobacco Shandong Industrial (CTSI) started research of crushball technology in an effort to build Shandong Province into a “national-level crushball research, development, and application base”, and set itself as a successful example of establishing a new categories of Chinese cigarettes and applying new technology. Within such a context, a new slim cigarette product containing a flavor capsule with the tea aroma, known as the Mount Tai (Confucian slim cigarettes), emerges just in time. Therefore, CTSI became the first Chinese manufacturer to independently develop a new slim cigarette product with a new tea aroma, which perfectly integrates this aroma with the flavor of tobacco.
Diversity of Aromas
The emergence of the crushball technology has led to the opening of a veritable “Pandora’s box” of enriching and customizing types of aromas in cigarette production. As a result, the many types of aromas that were unimaginable or that simply could not be made in the past can be freely experimented with and manufacturers will be able to produce them easily. This technology has effectively unleashed a lot of enthusiasm of tobacco manufacturers for developing new types of aromas for their big cigarette brands.
In comparison with the many types of aromas that were conceptualized in the past, new types of aromas developed today are more perceptual and concrete, with consumers able to easily feel and experience them in a direct way. Today, the fruity and flowery flavors developed in the past are still universally well received by consumers. After such flavors are used in slim cigarettes without any inconsistency, tobacco manufacturers will be able to swiftly offer the market fresh products with new types of aromas, including such exotic flavors as jasmine and blueberry.
Yet, among the new types of developed aromas, the one that is widely favored above others is the liquor flavor. In particular, after China Tobacco Guizhou Industrial developed and presented the Guiyan (National Liquor Flavor) brand cigarettes to great acclaim in 2012, many other tobacco manufacturers saw great business opportunities in developing liquor-flavored cigarette products. In China, there has long been a psychological connection that “tobacco and liquor are never far from each other”. So, some tobacco manufacturers have launched head first into developing new products with foreign liquor flavors like Champagne and others.
Another new type of flavor, which has swiftly become a favorite is the “tea aroma”. In comparison with liquor flavor, tea aroma has an even stronger potential, as it is more natural to combine tea aroma with liquor flavor. A few years ago, some tobacco manufacturers applied the concept of tea aroma in the blending formula for their cigarette brands. But due to their failure to make the aroma of tea clearly stand out and their lack of r&d persistence, the emergence of tea as an aroma in cigarettes at the time was very brief. Today, with new technology and media, the introduction of tea aroma in cigarette production will probably have a bright future.
The diversity of aromas, to a great extent, reflects the determination and aspiration of tobacco manufacturers to pursue innovation and seek change. It also indirectly reflects the strengthening of the existing market patterns. Under such circumstances, it is impossible for traditional markets and traditional styles to expect significant breakthroughs. Therefore, use of new types of aromas as the most direct and most valid approach to embody innovation and win favor from consumers undoubtedly means yet another possibility.
Guiyan (National Liquor Flavor) of China Tobacco Guizhou Industrial Co., Ltd.
Design Customization
In 2015, CTSI introduced the Kuanzhai series of cigarette products of its Pride brand family, which surprised everyone. The Kuanzhai serial products offer quite a few bold designs in terms of the form, style, relevance, etc. The development was an innovation based on comprehensive integration of strong points from other products, with the pattern of packets, the type of aroma, the form of filter tips and the product concept all different from those of others. Within the context of following the general trend in cigarette production, Kuanzhai, given its excellent designs and high popularity, is indeed highly attractive to consumers and can easily generate consumer interest.
In the future, such integrative innovation, represented by Kuanzhai, will become the new channel and orientation for innovation and will focus on design customization. Customization will, in turn, be manifested in many aspects, such as packets, the type of aroma, the shape of filter tips, the form of cigarettes, where styles and concept can all undergo a great deal of innovation.
First of all, there are new developments of special-shaped packaging. Besides traditional and conventional soft and hard packets, designs of special-shaped packaging, including hand-made packaging, are becoming a distinguishing characteristic for newly developed cigarette brands.
Secondly, the shapes of filter tips have become more diversified. Besides continuing to promote the reduction of the tar content and other harmful substances, every tobacco manufacturer without exception is making great efforts to improve the designs of their products, in hopes of offering consumers a pleasant surprise when opening the packet and “lifting the veil” over its contents.
And finally, conceptual designs have become more vivid and three-dimensional. China Tobacco Hunan Industrial distinguished itself with fantastic designs of its new member of the Baisha (Progress Every Day) brand family, and gave a lot of thought to consumer demand that controlled the tone of this new product, preventing it from giving the impression of loftiness that other products of the same brand used to have. Such innovations of conceptual design have enabled products to have more distinctive characteristics.