Friday 29 Mar 2024
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This article first appeared in edGY, The Edge Malaysia Weekly, on November 2 - November 8, 2015.

 

DO a quick survey around and you’ll find that someone you know — a relative, a friend or a friend of a friend — owns a vape store. If not, take a drive to a nearby business development centre and you’ll find vape stores burgeoning like durian stalls during peak season.

According to Jamie Tee, chief financial officer of Vape Embassy, we are looking at a RM2 billion industry with about 1,500 vape retail stores nationwide — a small figure compared with our high potential market size.

For starters, UOB Kay Hian’s 2015 report shows that 23% of Malaysians smoke and we are seeing more and more people making the switch to vaping for various reasons, including health and cost.

At present, the number of adult Malaysian vapers is estimated at between 250,000 and one million.

Globally, consumption of British American Tobacco (BAT) cigarettes dropped 1.4% from 676 billion packs in 2013 to 667 billion in 2014. In Malaysia, the company saw a 3.7% decline in domestic and duty-free sales volume despite a 6.2% (RM4,796 million) increase in its revenue from 2013.

The lower cigarette consumption is attributed to many reasons but let’s face it, you can’t possibly avoid the colossal cloud of vapour at every corner you look. Vape is a thing in Malaysia. If you’re not a vaper yourself, some of your friends surely are.

We speak to Subohm Studio, Vape Embassy and VapeClub.my to explore the reasons behind this growing trend of vape consumption, how lucrative the business really is and why consumers make that switch.

 

Can make money, ah?

“Malaysia is the second largest vape market [after the US] in the world. This creates a lot of business opportunities for youngsters,” says Lenny Farah Mohd Nor, co-founder of Subohm Studio.

Lenny Farah and her business partner, Imeer Nasution, have been in the vape business for about two years now. With a set-up cost of RM130,000, they began by importing products from China and the US and eventually started brewing their own e-juices.

Currently, Lenny Farah sells about 60,000 bottles a week — and they sell out fast— with each 30ml bottle going for about RM40 to RM45. The cost of producing each bottle is half its selling price. They also export their products to China, Brunei, Thailand, Indonesia, Dubai, France and Russia.

“Brewers make more money than retailers,” says Tee of Vape Embassy, which has outlets in Kuala Lumpur and Penang.

However, he notes, retailers too enjoy a decadent slice of the pie. By forking out an average of RM120,000 as starting cost and a monthly running cost of about RM6,000, most retailers can be assured of a net profit of about RM20,000 a month, just by selling to local customers.

Last month, online subscription service VapeClub.my jumped onto the vaping bandwagon with a very lean start-up cost of RM60,000. After taking a quick flavour profile test on its website, VapeClub subscribers will receive a box of four 30ml liquids, which goes for RM119 a month, including delivery.

VapeClub reaps a net profit of RM20 to RM30 per box. Co-founder Jeremy Ong hopes to sign up 1,000 subscribers by December and to break even by the third month of their business.

 

Is vape here to stay?

In an interview with Huffington Post, rock guitarist Dave Navarro spoke — perhaps a little too enthusiastically — about how vaping “saved his life”, claiming it helped him quit smoking (and vaping) entirely.

“Smokers know that smoking kills,” Tee laughs. “But they cannot get out of that habit. So, if you look at this, vaping is a way out.” He also claims that for regular smokers, vaping costs about three times less than cigarettes in the long run.

There’s more to vaping than the intention to quit cigarettes. According to edGY’s quick survey on vaping and smoking, most vapers take it up for health and cost reasons.

Meanwhile, a lack of government regulation in the vape industry is a cause for concern for businesses and consumers alike. At present, there is no fixed regulation on underage purchases of e-cigarettes and safe testing of e-juices produced by home brewers.

“There are a lot of home brewers who are taking advantage of the booming market. They do not have basic knowledge of it. They YouTube it, buy the ingredients from random sources [and] they do not educate themselves on the proper techniques for brewing,” remarks Lenny Farah, who also notes that a possible government ban on vaping in Malaysia will affect businesses substantially.

So, what exactly made vaping weave itself into Malaysia’s social fabric on such a large scale?

Think fast fashion — new vape mods or juices come into the market every two weeks. The average vaper would own a couple of mods, about four to five tanks and a collection of e-juices to suit his mood or preferences for the day.

Then, think café hopping — a group of friends decide to check out a new vape store. They spend an hour or two taste-testing around a table lined with the latest e-juices. They laugh, they talk, they hang out and they vape.

In fact, that’s what most vape shops work to achieve now — to create not just a retail store but a lifestyle centre.

“It’s where all the youth hang out. We do it up with a ping pong table, PS4, so they can come and chill out and have some beers and vape,” says Chua Eng Meng, owner of Vape Embassy’s outlet in Penang.

“Before a night out, [vapers] will stop by the shop to get everything up and running — make sure their batteries are good and there is enough juice for the night,” he adds.

Furthermore, there’s the hobbyist side of things that is unifying the pockets of vape communities in Malaysia that is not seen in communities that smoke.

For one, there will be a Cloud Competition Championship in Dataran Underground in December. You also have Facebook groups with more than 100,000 followers discussing coiling techniques and selling home-brewed e-juices.

“Trend or not, I think vape is here to stay,” says Tee, adding that large corporations buying over vape stores indicates the strength of the industry. In September, for example, BAT signed a conditional agreement to fully acquire CHIC Group, Poland’s largest e-cigarette maker with more than 800 outlets across the country.

BAT, whose conventional cigarette brands include Dunhill, Lucky Strike and Pall Mall, is already selling a line of cigarettes called Vype in the UK.

In Malaysia, there’s still a huge gap to fill. “Compared with vape, how many outlets sell cigarettes in the whole of Malaysia? Possibly one or two million. Compare that with 1,500 shops,” says Tee.

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