The vape industry has been quite a rollercoaster ride since 2021. Looking back at that era, it’s hard not to feel nostalgic. In 2021, RELX Technology (a leading player in the vape sector) alone hit a massive revenue of $12 billion, with the domestic retail market approaching $30 billion. At that time, both RELX and Smoore International were on a tear, consistently seeing explosive growth in both revenue and profits. To put it in perspective, RELX’s revenue jumped from a modest $210 million in 2018 to $12 billion in 2021, while Smoore’s revenue soared from $2.3 billion to $20 billion over the same period.
However, fast forward to 2024, and the picture is dramatically different. RELX’s revenue now sits at just about a third of its 2021 peak, even after including a solid chunk from international markets. Similarly, Smoore’s mainland operations have shrunk to a few billion dollars in revenue. What happened? Well, the slowdown in growth can be attributed to a number of factors, including flavor restrictions, heavy taxation, and the rise of illegal alternatives. As we all know, vape flavors were one of the key selling points that attracted younger users, and with flavor restrictions in place, it’s been harder to lure in consumers.
Then there’s the tax burden – production taxes have jumped to 36%, and wholesale taxes sit at 11%. That puts serious pressure on both manufacturers and consumers. As a result, many vapers have turned to illegal alternatives that are cheaper and offer more flavor options. To make matters worse, the illegal vape market continues to thrive, with an estimated 90% of the market still unregulated. Although authorities have made some attempts at cracking down on illegal vapes, the enforcement hasn’t been enough, leaving legal players in a tough spot.
But despite all of this, we’ve stuck with tracking the industry because we believe the worst is behind us. The long-term prospects for the vape sector remain strong, especially with increasing recognition of its harm-reduction benefits. A growing body of research, along with increasing endorsements from authoritative institutions, backs the idea that vaping is significantly less harmful than traditional smoking. The reduction in harmful substances like nicotine, formaldehyde, acetaldehyde, and metallic particles makes vaping a viable alternative.
With that in mind, we continue to believe that the vape market still has massive room for growth. After all, there are still 3 billion smokers worldwide, and even though active users of regulated vapes have dropped below 10 million in some regions, this is a drop in the ocean when compared to the global smoker population. The shift towards harm-reduction products is a slow burn, but it’s definitely gaining momentum.
The 2024 Stock Market Performance
Looking at RELX’s stock performance in 2024, the company saw a modest 8.5% increase, which is underwhelming when compared to the Hang Seng Tech Index’s impressive 18.7% rise. This discrepancy highlights the importance of diversification. While it’s easy to get excited about one promising company, it’s crucial to balance your portfolio with some index funds for stability.
Compared to Smoore International, RELX’s stock performance in 2024 is notably underwhelming, despite RELX’s earnings being stronger. RELX is expected to hit $4.5 billion in revenue in 2024, a year-on-year increase of 80%, and its adjusted net profit is forecasted to climb 44%. Meanwhile, Smoore’s revenue growth will only be about 6%, with its total return dropping by over 10%. So why the difference in stock performance?
It seems to come down to expectations and market sentiment. On paper, RELX has a strong story – its international expansion is thriving, and 2024 has been a solid year in terms of revenue growth. However, the lackluster growth in its domestic market and the high degree of uncertainty surrounding its short-term prospects in the mainland seem to be overshadowing the company’s positive momentum.
Smoore, on the other hand, is showing more immediate growth, driven by its new product lines, including pod vapes and heated-not-burn products. These newer segments have excited investors, particularly those with a short-term focus. Another factor is the difference in how the companies motivate their leadership teams. Smoore’s compensation is more closely linked to stock performance, creating a greater incentive for strong execution.
The Outlook for RELX in 2025
What’s in store for RELX in 2025? First, the company’s revenue is likely to hit around $5.6 billion, growing by 40-50%. This increase will mostly come from its expanding international operations. However, its adjusted net profit may grow at a slower pace, mainly because international operations are still less profitable. The company’s focus on overseas markets is key to its growth, and RELX has set ambitious targets, expecting to increase its international revenue by an additional $1.5 billion by 2025.
The main challenge for RELX will be maintaining profitability as it scales its international operations. While its overseas revenue growth has been impressive, the margin on international sales is lower than in its domestic market, which means the company will need to optimize its cost structure to ensure profitability. RELX will also need to address concerns about its domestic market, where regulations and competition are stiff, to ensure stable revenue streams from home.
A Close Look at RELX’s International Expansion
RELX’s international expansion has been a major factor in its recovery. By Q3 2024, more than 50% of the company’s revenue came from overseas markets. The company’s primary focus has been on Southeast Asia, North Asia, and now, it’s moving into the European, Middle Eastern, and Latin American markets. In the short term, RELX plans to enter five new countries in these regions, where it already sees itself as a top player.
The company’s international success can be attributed to its product innovation. In 2024, RELX launched new open-system products, such as the RELX Prime, to address the growing consumer demand for customizable vape experiences. These products allow consumers to choose their own flavors and customize airflow, which is perfect for the trend of “flavor innovation” and personal preference.
Moreover, RELX has also been increasing its presence in convenience stores and vape specialty shops across Asia, where consumers are looking for high-quality, affordable products. Its push for higher-end, longer-lasting disposable vapes has also paid off, with products like the RELX Infinity proving popular in both domestic and overseas markets.
The Big Picture: Are Vapes Here to Stay?
Despite regulatory challenges, the vape industry as a whole is still growing rapidly. While the market has slowed in some regions due to tighter regulations, other areas are seeing explosive growth. For instance, markets that were once overlooked—such as Africa—are now gaining attention. China, too, continues to be a hub for production, with many companies establishing manufacturing plants in Southeast Asia.
There are still hurdles, of course. Regulatory scrutiny is ramping up in some places, and as the U.S. FDA has recently shown, more stringent rules could be coming for vape flavors, potentially limiting what companies can offer. However, there is also a glimmer of hope. The FDA recently approved the menthol flavor for the Njoy product line, which could signal that there is a shift in favor of more diverse flavors. This could pave the way for more relaxed regulations, and help stimulate growth in both domestic and international markets.
Conclusion: Betting on the Future of Vaping
When we look at the overall picture, it’s clear that the future of the vape industry is still bright, despite the current challenges. Companies like RELX are navigating a tough regulatory environment, but their international expansion, innovative products, and growing recognition of vaping’s harm-reduction potential mean that the sector has a lot of room to grow.
For investors, RELX stands out as a promising opportunity. The company has proven its ability to expand into international markets and innovate with new products. While it may not have seen the massive stock price growth of some of its competitors in 2024, its long-term potential is undeniable. As regulatory barriers loosen and demand for alternative smoking products continues to rise, RELX’s stock is still significantly undervalued, and 2025 could be a breakout year for the company.
In short, while the rollercoaster ride isn’t over, the future looks bright for RELX and the global vape industry. So buckle up, because the next chapter in the vape revolution is just getting started.
