Kaival Brands Innovations Group reported revenue of $18.1 million for its fiscal second quarter, which ended April 30, 2021.
The company also received two significant Bidi Stick orders with a combined value of $41.6 million. According to Kaival Brands CEO Niraj Patel, these orders represent some of the largest individual orders since the company started business. “We believe [they] are indicative of our robust pipeline for the innovative Bidi Stick and our shift to large wholesalers and distributors versus smaller retailers,” he said in a statement.
“This shift in strategy also helps us remain an industry leader in our effort to continually exceed Prevent All Cigarette Trafficking (PACT) Act compliance requirements. The Bidi Stick experience is unrivalled as evidenced by our leading market share within the ENDS category,” said Patel.
While the potential contract values of additional national retailers are significantly higher than those of smaller retailers and wholesalers, the process to navigate these contracts is more onerous and time consuming, according to Kaival Brands. However, Patel believes such contracts are worth the investment because the company expects more large orders to follow.
Kaival Brands recently received approval to market and sell Bidi Vapor products in 11 countries. Despite Covid-19 related delays in building its international infrastructure, the company is confident it soon will be able to launch the Bidi Stick in the U.K. as well.
Kaival Brands is also enthusiastic regarding the opportunity for its Bidi Pouch, which has been developed without Swedish Match intellectual property.
BAT added more than 1.4 million noncombustible product consumers in the first quarter of 2021, to reach a total of 14.9 million, CEO Jack Bowles announced in a trading update.
“We are investing and building strong, fast growing international brands in each segment, rapidly accelerating our reach and consumer acquisition, thanks to our digitalization and our multi-category consumer-centric approach, supported by the right resources and products, and our agile organization,” said Bowles.
“Our portfolio of noncombustible products is tailored to meet the needs of adult consumers. We are growing New Categories at pace, encouraging more smokers to switch to scientifically substantiated reduced risk alternatives.”
The company’s New Category products are now sold in 74 markets across 53 countries. Its Vuse/Vype vapor devices have been gaining value share in all Top 5 markets. Vuse is even approaching global leadership in vapor, reaching 31.4 percent category value share in the Top 5 vapor markets year-to-date in April, according to Bowles.
We are growing New Categories at pace, encouraging more smokers to switch to scientifically substantiated reduced risk alternatives.
BAT’s Glo tobacco-heating product (THP) recorded positive volume share momentum in many markets, including Japan. The device achieved 16.2 percent category volume share in the Top 9 THP markets year-to-date in April.
According to Bowles, BAT has also been consolidating its international volume share leadership in Modern Oral, with strong Velo volume share growth in the U.S. The company’s category share of Modern Oral in the Top 5 markets reached 40.2 percent year to date in April
BAT’s combustibles segment was characterized by strong pricing and robust volume, the company said. Group value and volume share were both up 10 base points year to date, with full year industry volume expected to be down about 3 percent.
For 2021, BAT now anticipates constant currency revenue growth of above 5 percent, ahead of its 3-5 percent guidance.
RLX Technology shares took a tumble back in March after China announced it would soon start regulating e-cigarettes, falling more than 40 percent. Over the past week, on expected high earnings, the company’s stock began to recover and was at $11.93 pre-market today after seeing a low $7.89 in March. Today, the company announced its unaudited financial results for the first quarter ended March 31, 2021.
Kate Wang / Credit: RLX
Net revenues were RMB2.4 billion ($366.1 million), up 48.2 percent from RMB1.62 billion in the fourth quarter of 2020. Gross margin was 46 percent, compared to 42.9 percent in the fourth quarter of 2020. GAAP net loss was RMB267 million, compared with RMB236.7 million in the 2020 fourth quarter. Non-GAAP net income was RMB610.5 million, representing an increase of 45.6 percent from RMB419.3 million in the fourth quarter of 2020.
“2021 began, on a solid note, with strong growth in key performance metrics of our business,” said Ying (Kate) Wang, co-founder, chair of the board of directors and CEO of RLX Technology, in a press note. “Specifically, our expansion in distribution network fueled a strong sequential growth, further demonstrating sustained user demand for our e-vapor product portfolio.”
“As the go-to brand of e-vapor products in China, we remain dedicated to investing in deepening our scientific research, improving our technology and product development, expanding our distribution network and retail outlets as well as enhancing supply chain and production capabilities.
“In the first quarter, we opened our Quality Lab to further strengthen our quality assurance and control capabilities, and started developing our second and third exclusive production plants to enhance our production capabilities. We believe we are well positioned to further capture the growth potential in the e-vapor industry in China,” Wang concluded.
During an early morning earnings call, RLX CFO Chao Lu said the company is dedicated to investing in deepening its scientific research, improving its technology and product development, expanding its distribution network and retail outlets, as well as enhancing supply chain and production capabilities.
“Our robust results in the first quarter of 2021 exemplify our strong capabilities in meeting user demands for reliable, innovative and trustworthy products,” said Chao Lu, who joined the company in February. “Building on rapid revenue growth and continued efforts in improving operating leverage, our gross margin and non-GAAP net margin have remained steady in the first quarter. We will continue to pursue user value creation by enhancing our suite of product offerings and strengthening our brand leadership in the market.”
For the second quarter of 2021, RLX Technology expects net revenues to exceed RMB2.85 billion, and expects non-GAAP net income to exceed RMB720 million. The company’s expected GAAP net income will include share-based compensation expenses which depend on the company’s share price. The company currently also expects gross margin to remain steady.of
E-cigarette stocks listed on the Stock Exchange of Hong Kong plunged in the afternoon session on Wednesday, following an official warning of that e-cigarettes can cause damage to consumer’s health. Shenzhen-based Smoore International, the world’s largest vaping device manufacturer, saw its shares slump nearly 20 percent on the exchange near the end of the afternoon session, before finishing down 17.1 percent.
Credit: Boonchok
By comparison, the benchmark Hang Seng Index gained 0.88 percent. China Boton Group, an vapor industry manufacturer also based in Shenzhen, lost 17.94 percent in Hong Kong trading, while Hong Kong-based Huabao International Holdings shed 7.69 percent, according to news in China’s Global Times.
The rout was triggered after the National Health Commission (NHC) on Wednesday unveiled a report on the health risks of smoking cigarettes, jointly with the World Health Organization’s (WHO) county office in China, which said that there’s sufficient proof that e-cigarettes are unsafe and harmful to health.
The country’s population of smokers has topped 300 million, with the smoking rate for those aged 15 and above standing at 26.6 percent and the percentage of male smokers hitting 50.5 percent, according to the report. Cigarettes claim the lives of more than 1 million people in the country per year. The annual number is estimated to rise to 2 million by 2030 and then to 3 million by 2050, assuming the absence of effective actions.
In 2016, a groundbreaking 200-page report that supports e-cigarettes as a tool to quit smoking and demolishes several vaping myths in the process was released by one of the world’s most prestigious medical organizations. The Royal College of Physicians (RCP), the most respected medical institution in the United Kingdom, concluded e-cigarettes are 95 percent safer than regular cigarettes and are likely to be hugely beneficial to public health.
Several other studies have found similar conclusions over the last five years since the RCP study was published. The WHO has long refused to see e-cigarettes as a harm reduction product.
Nonetheless, Hong Kong-traded BYD Electronic still posted a massive gain in the final hour of trading, soaring as much as 22.91 percent before ending up 11.73 percent, on reports that the company has finalized patenting its e-cigarette business, which is expected to begin mass production in June. Its parent company BYD closed up 2.39 percent in the Hong Kong market on Wednesday, while edging down 0.2 percent in the Shenzhen market.
Charlie’s Holdings, parent to the Charlie’s Chalk Dust brand, announced the company’s financial results for the first quarter (Q1) ending March 31, 2021. Charlie’s reported that revenue, gross profit, gross margin, and cash balance all increased from Q4 2020 to Q1 2021, according to a release.
Revenue for the 1Q of 2021 was $4,361,000, an increase of $131,000 compared to Q4 2020, and a decrease of $44,000 or 1 percent, compared to $4,405,000 for the same time the previous year. Gross profit for Q1 2021 was $2,418,000, an increase of $305,000 compared to Q4 2020 and a decrease of $24,000, or 1 percent, compared to $2,442,000 for the same period 2020.
Other announcments include:
Operating loss decreased 95 percent year-over-year, and 70 percent from Q4 2020, to $229,000,
Cash balance of $3.5 million,
Total assets of $8.1 million,
Closed a $3 million capital raise in common stock (priced at $0.0085) with company founders,
Introduced Pachamama Disposables, Charlie’s first-ever entrant into the rapidly expanding U.S. disposable e-cigarette market,
Successfully assembled a solution “network” in order to meet the requirements of both the Consolidated Appropriations Act of 2021 and the Prevent All Cigarette Trafficking (PACT) Act to ensure uninterrupted service to the company’s distributor partners.
The company announced in mid-2020 that its premarket tobacco product application (PMTA) had entered the substantive review phase of the U.S Food and Drug Administration (FDA) regulatory process. “Having engaged a team of more than 200 professionals and invested nearly $5 million to compile and submit Charlie’s initial PMTA submission, the company is confident that the FDA will recognize that Charlie’s submission is both distinguished and suitable for approval,” the release states. “The company believes its comprehensive PMTA will ultimately prove a competitive advantage for Charlie’s. Most of the company’s competitors did not have the desire, the technical expertise, or the financial resources to complete the PMTA process. As a result, in fewer than 12 months’ time, when others are forced to withdraw their products from the market, Charlie’s may be one of a very select group still legally allowed to operate in the premium e-liquid product space.”
Presenting at the Goldman Sachs Global Staples Forum on May 18, Philip Morris International CEO Jacek Olczak highlighted the next steps in the company’s strategy to becoming a majority smoke-free company in terms of net revenue by 2025.
Olczak highlighted IQOS’ strong and accelerating topline momentum and potentially lucrative opportunities to expand beyond nicotine into broader lifestyle/wellness markets, such as high-margin botanicals and respiratory drug delivery.
IQOS added more than 1.5 million users in the first quarter of 2021, according to Olczak—well above its historical average of 1 million new users per quarter. Robust conversions at 70 percent to 80 percent continue to dwarf the average conversion rates of many vapor products, which are in the mid-teens.
The heat-not-burn device is now available in 66 markets, with a user base of 19.1 million, of which 14 million have stopped smoking and fully converted to IQOS.
Olczak was particularly excited about the launch, scheduled for the second half of 2021, of PMI’s ILUMA IQOS product, which he believes could drive even higher conversion rates and margins as PMI continues to leverage its fixed cost base on IQOS while streamlining its customer acquisition and retention.
Olczak also reviewed management’s ongoing efforts to digitalize and simplify business processes, including PMI’s commercialization strategies around IQOS. According to him, these efforts have already yielded $60 million of gross savings in selling, general and administrative expenses toward management’s target of $1 billion in 2021–2023.
Olczak believes that PMI’s digitalization efforts will not only further reduce the cost of acquiring and retaining new users and ultimately drive more profitable growth but also accelerate conversion and customer acquisition, especially with the eventual global rollout of PMI’s digital customer experience.
Olczak also touched on PMI’s longer term opportunities beyond heat-not-burn and vaping, including nicotine pouches and next-generation devices.
Management is also looking into adjacencies, such as broader lifestyle/wellness markets, such as high-margin botanicals (including pure CBD) and respiratory drug delivery. The company aspires to achieve at least $1 billion in incremental net revenue from its beyond nicotine efforts by 2025.
Olczak expressed optimism about PMI’s competitive advantages in terms of its capabilities around product safety and efficacy and validating/substantiating scientific claims.
Myst Labs, a Chinese e-cigarette maker co-founded in 2019 by Chenyue Xing, a chemist who was part of the team at Juul that invented nicotine salts, recently raised “tens of thousands of dollars” from a Series B funding round. The financing was led by its existing investor, IMO Ventures. Thomas Yao, CEO and another co-founder of Myst, is a founding partner of IMO Ventures.
Credit: Myst
The news comes after of one of China’s top tech policy makers that published a set of draft rules that would bring e-cigarettes under the same regulatory scope as traditional tobacco, which means vaping companies will need licenses for production, wholesale and retail operations in the world’s largest manufacturer and exporter of e-cigarettes.
These changes, announced in March, will deal a blow to small producers with poor quality control, leaving the industry with a handful of established and compliant players, Fang Wang, head of marketing at Myst, told TechCrunch.
For one, standardizing production is costly, Wang said. From ceramic coils, to batteries, to fragrance, every component and ingredient of a vape will need to meet stringent requirements. E-cigarette companies will also need to pay tobacco taxes, an important source of tax revenue for the Chinese government.
The other challenge is how to lower nicotine content. Many current products on the market have a relatively high nicotine concentration at 3-5 percent, so if China is in line with the European Union standard of 1.7 percent, many small brands will be forced out of business because they lack the know-how to produce low-nicotine vapes that still satisfy users’ crave, suggested Wang.
“We’ve received a lot of investor interest in the past few months. Before that, professional, institutional investors often avoided e-cigarette companies, but they are showing more willingness now as regulations take shape,” Wang added.
Myst declined to list its other investors but said they include high-profile individuals involved in the e-bike sharing company Lime, Facebook and the bitcoin industry.
Most of Myst’s current sales are from China, where it has opened 600 stores and plans to reach a footprint of 1,000 stores in the next few quarters. Overseas, the startup has a retail footprint in Malaysia, Russia, Canada and the United Kingdom, where it’s selling in over 30 shopping malls and a few hospitals through its distribution partner, Ecigwizard.
The new funding will allow Myst to further expand its sales network and strengthen its research and development. The company prides itself on its product containing 1.7 percent nicotine, which it claims can deliver the effect of a 3 percent counterpart. At her lab, Xing is currently working on e-liquids with “natural tobacco contents” and without organic acids, additives that allow nicotine salts to vaporize and be absorbed.
Myst is still a relatively small player compared to China’s market dominator Relx, which went public in New York earlier this year and submitted a premarket tobacco product application (PMTA) to the U.S. Food and Drug Administration to sell in the U.S. But Yao is optimistic about Myst’s future. Vaping, he said, is one of the fastest-growing consumer categories in China. Myst’s recent sales are tripling every three months.
“In other consumer areas, you rarely see a top player commanding 60-70 percent of the market, so there is still a lot of room for the top 10 players to grow,” the CEO said.
Charlie’s Holdings, Inc., parent to the Charlie’s Chalk Dust and Pacha Mama brands, announced that it has closed a $3 million capital raise through the private sale of 351,669,883 shares of common stock to the company’s founders, Brandon Stump, CEO, and Ryan Stump, COO, according to a press release. The company intends to use the proceeds from the offering to drive substantial future growth, facilitate new product launches, increase working capital, retire outstanding debt, and for other general corporate purposes.
“The extensive process required to compile and submit a comprehensive premarket tobacco product application (PMTA) to the FDA will ultimately prove a huge differentiating factor for Charlie’s; but it was also very expensive. Charlie’s invested nearly $5 million for its initial PMTA submission and the company was in need of additional capital,” explained Jeff Fox, a member of Charlie’s board of directors. “After lengthy negotiations with numerous other potential investors did not produce acceptable terms, we are pleased that our founders, Brandon and Ryan Stump, chose to personally fund this $3 million common stock only investment. This financing does not include warrants or any other inducements. It will provide Charlie’s with sufficient proceeds to meet all of the Company’s current financial obligations and to drive substantial future growth opportunities.”
David Allen, CFO said the proceeds from the private placement will strengthen the company’s balance sheet, accelerate European growth, allow for expansion into the Middle East, and facilitate the company reaching several important near-term milestones, including the FDA’s anticipated announcement of Charlie’s successful PMTA.
“Such an accomplishment will allow Charlie’s to benefit tremendously as one of only a select group of companies operating responsibly in the premium e-liquid product space,” said Allen. “Combined with our international growth, a domestic PMTA approval will dramatically increase Charlie’s sales, profits, and market share. We expect 2021 will be a very exciting year for our shareholders.”
Chinese stocks related to the traditional tobacco business rose following suggestions that China would regulate e-cigarettes like tobacco products.
Cigarette packaging provider Letong Chemical and cigarette printing and filter maker Shaanxi Jinye Sci Tech & Education surged by the daily cap of 10 percent, according to the South China Morning Post.
By contrast, vapor companies tanked. Smoore lost HKD106 billion in market cap while RELX Technology shed $14.45 billion on the New York Stock Exchange immediately after the announcement.
On March 22, China’s Ministry of Industry and Information Technology and the State Tobacco Monopoly Administration released a proposed policy that aims to address tobacco product quality issues and false advertising. Without providing details, the agencies indicated that the changes would also apply to vapor products. The changes are currently subject to a public consultation that ends April 22.
Having taken arduous and often herculean steps to remain compliant with all government regulations, Kaival Brands and the leadership at Bidi Vapor hope that additional supervision of e-cigarette manufacturing will help raise standards for the devices worldwide.
With around 300 million smokers, China is the world’s largest tobacco market and the world’s largest potential market for vapor products. iiMedia Research estimates that the Chinese e-cigarette market could reach CNY10 billion ($1.53 billion) in 2021. There were more than 170,000 vapor companies as of February 2021. The market is also expected to grow in the future year.
In 2019, Chinese authorities banned e-cigarettes from online shopping channels. The restrictions prompted e-cigarette companies to invest significantly in developing physical stores across the country. RELX Technology, for example, received 30 percent of its revenues from online sales prior to the ban. In January 2020, the company pledged to invest more than CNY500 million over the three years to open 10,000 authorized sellers in China.
Some vapor companies welcomed the prospect of greater supervision over the e-cigarette sector in China. U.S.-headquartered Kaival Innovations Group, which distributes the Bidi Stick brand, said the announcement would have no effect on its operations.
“Having taken arduous and often herculean steps to remain compliant with all government regulations, Kaival Brands and the leadership at Bidi Vapor hope that additional supervision of e-cigarette manufacturing [in China] will help raise standards for the devices worldwide,” the company wrote in a press release.
Kaival Brands Innovations Group reported significant revenue and profitability milestones in the quarter ended Jan. 31, 2021. The company achieved a cumulative $100 million in revenues since it commenced business operations in March 2020, despite revenue slowdowns during the fourth quarter of 2020 due to packaging and labeling updates.
During the fourth quarter of 2020, the company and Bidi Vapor made the decision to wash out inventory and repackage the entire product line in an effort to go “above and beyond” U.S. Food and Drug Administration packaging and labeling guidelines.
First quarter 2021 revenues were $37.3 million, compared to revenues of $0 in the first quarter of 2020. “Given the significant expenses associated with infrastructure, start-up costs, marketing, legal and many other business necessities, we are proud of our ability to reach profitability so early on in our development,” said Niraj Patel, Kaival’s president and CEO, in a statement.
“The gross profit number provides a glimpse into our future net profits as we continue to scale the business in a smart and efficient operational manner.”
The gross profit number provides a glimpse into our future net profits as we continue to scale the business in a smart and efficient operational manner.
From a revenue perspective, February and March have benefited from the company’s new distribution partnerships as well as the rollout of the Bidi Pouch. As such, the company expects revenues to increase during the second fiscal quarter ending April 31, 2021. “Given our current visibility, we remain very confident in our full-year fiscal 2021 revenue guidance of $400 million to $450 million,” Patel said.
Kaival Brands Innovations Group reported revenue of $18.1 million for its fiscal second quarter, which ended April 30, 2021.
