Disclaimer
This article is solely for research on global industry development and does not involve any evaluation, prediction, or investment advice concerning capital markets.
It is for reference only. Due to the author’s personal professional limitations, all statements and data should be verified against the company’s official reports.
The views expressed herein are solely those of the author.
Author: Alan Zhao
On August 20 (Beijing time), Smoore, one of the world’s largest new tobacco manufacturers and brand owners, released its 2025 interim results, providing a comprehensive overview of its operations in the first half of the year. In addition to financial data, the report contained extensive commentary on Smoore’s own business as well as the global industry landscape—valuable information for analyzing global industry trends.
The author has reviewed and summarized key statements from the report and, combined with personal understanding of industry development, drafted this article for research reference. This is a personal perspective and welcomes critique and discussion.
This analysis focuses solely on Smoore’s vaping (ENDS) and heated tobacco product (HTP) businesses.
Key Takeaways
● At the beginning of 2025, Smoore undertook internal strategic discussions and organizational restructuring. By mid-2025, these adjustments had begun to deliver results: the strategy became more focused, execution more concrete, and methodologies and paradigms gradually took shape.
● Compliance has already reshuffled major markets such as the U.S. and Europe. Smoore has positioned compliance as its most critical competitive factor, elevating it to a top strategic priority and making substantial financial investments. The compliance investments by Smoore and other leading players will further accelerate market compliance, increasingly squeezing non-compliant brands and companies out of the market.
● Compliance in vaping is a high-barrier but clearly defined path. Innovation, however, is a greater challenge—mainly because the future trajectory is uncertain. Compared with the “large-screen” innovations of the past two years, current innovations—such as adjustable power systems—are closer to real consumer needs, but still lack evidence of long-term demand sustainability.
● Heated tobacco products will likely see broader global adoption over the next year. However, a shake-up of the market structure has not yet materialized. IQOS still appears to face no real challenger.
● Smoore’s strategic overhaul underscores that the final round of global NGP competition is now underway. The coming 12 to 18 months will be decisive for Smoore—and may mark the last opportunity for others to remain in the game.
● Regrettably, the report makes no mention of nicotine science or tobacco harm reduction research. This may be because intense competition has kept companies focused on their own survival, leaving little capacity to address the deeper harm reduction needs of tobacco consumers. This may also represent one of the biggest shortcomings of supply chain companies compared with global tobacco firms.
The following sections provide specific descriptions and interpretations, organized into product categories, market, compliance, and R&D. Comparisons are also drawn with Smoore’s 2024 full-year report released in March 2025.
(The English translations of the cited financial report statements are provided for reference only. Please refer to the original Chinese text as the authoritative source.)
I. Product Categories
1. Vaping (ENDS)
Smoore’s flagship technology brand, FEELM, launched a portfolio of multi-category solutions driven by advanced innovation. These solutions cover different product types, including adjustable-flavor systems, high-puff transparent tanks, and the 2+10 platform. The company’s proactive response to changing market demand and regulatory shifts translated into strong client orders. (P9)
Interpretation: From FEELM’s perspective, this marks the next phase of product innovation in vaping. These three innovations also appeared in 2Firsts’ 2025–2026 Product Trends report published in July. The key question is how sustainable these trends will be over time.
Smoore continued to leverage its self-developed data systems to enhance digitalized marketing, localized sales, and retail store monitoring, enabling rapid response to market changes. (P7)
Smoore also plans to leverage its technological and manufacturing expertise to strengthen market insights, adapt to emerging trends, and deliver innovative, compliant products that meet evolving customer and consumer needs. (P11)
The group intends to deepen cooperation with select clients by providing not only R&D and manufacturing services but also comprehensive support in marketing, brand promotion, and channel development. (P11)
Interpretation: Whether by reinforcing retail infrastructure to support its own brands or by offering full-chain services—from manufacturing to marketing—for B2B clients, it is evident that consumer engagement is becoming increasingly critical in vaping. Competition is intensifying, and for most traditional vaping firms—whose core model relies on manufacturing and sales—it will be extremely difficult to make up for weaknesses in consumer-facing capabilities. This dynamic will further accelerate consolidation across the supply chain.
2. Heated Tobacco (HTP)
Since mainstream HTP products have yet to fully resolve key consumer pain points such as cigarette-like taste and preheating time, both user penetration and adoption remain limited. Smoore will continue to focus on R&D in this category, aiming to collaborate with market participants to improve user experience and drive product adoption. (P11)
Interpretation: Smoore’s approach reflects the broader strategy of one of its major clients, BAT, in the HTP category—focusing on product experience enhancement and market expansion. Both of these levers, however, are primarily marketing-driven.
Author’s view:
1. With the push of international tobacco giants, 2025–2026 will see a new wave of consumer education and adoption of HTPs worldwide.
2. However, if BAT’s breakthroughs remain confined to the marketing level, it will be difficult to expect fundamental changes to the current market structure. Dislodging IQOS’s dominance cannot be achieved through marketing alone.
3. The real breakthrough for HTPs should not be “cigarette-like taste.” Five years ago, in discussions with traditional tobacco stakeholders, many argued that e-cigarettes could never replicate combustible cigarettes in flavor or ritual. Yet history has proven that vaping steadily replaced combustible use among consumers. (See blu e-cigarette data.)
4. Innovation in HTP should be approached through first principles: understanding why smokers smoke.
II. Market
1. United States
In the U.S. market, enforcement against non-compliant products has intensified at both federal and state levels. The Food and Drug Administration (FDA) has led federal actions through warning letters, civil penalties, import alerts, and criminal prosecutions. Meanwhile, a growing number of states are introducing legal actions targeting the surge in non-compliant flavored vaping products. (P6)
The U.S. vaping market remains dominated by non-compliant products, which has impacted the sales performance of Smoore’s clients. (P7)
Interpretation: Smoore’s commentary on the U.S. validates 2Firsts’ assessment since late 2024: regulatory philosophy and drivers have fundamentally shifted, with compliance now reshaping the market. In the first half of 2025, the market structure may appear unchanged, but the foundations are dissolving. By the second half, we can expect to witness “the melting of the iceberg and the rise of new lands.”
2. United Kingdom / Europe
Europe is undergoing a major regulatory shift on disposable vaping products, with several countries implementing restrictions or bans during the review period. As of June 1, 2025, the U.K.—a key European market—enforced a sales ban on disposable vaping products, regardless of nicotine content. The ban created significant opportunities for compliant products. (P6)
Interpretation: While the U.S. regulatory landscape was undergoing seismic changes, Europe was also preparing for a new wave of transformation. The U.K. ban is only a beginning, not an end. Regulatory divergence within the EU is expected to intensify, extending beyond the vaping sector into broader EU policymaking and political processes.
III. Compliance
During the review period, global regulators increased enforcement against non-compliant products. In the U.S., legal actions escalated, while several major European markets implemented bans on disposable vaping products. These developments collectively fostered a more compliant market environment, creating significant opportunities for companies like Smoore that combine strong compliance capabilities with market adaptability. (P4)
In the first half of 2025, the regulatory framework for electronic vapor products became clearer, and enforcement stricter. These developments created new growth opportunities for compliant players such as Smoore. (P6)
Interpretation: Compliance has emerged as the decisive force reshaping the market. Strategic foresight and investment in compliance have become the dividing line between large and small companies, and between strong and mediocre players. They will determine who remains at the table after the next round of industry consolidation.
Professional fees rose from RMB 15.19 million in the prior-year period to RMB 139.69 million in the review period, an increase of approximately 819.6%. As a share of revenue, professional fees rose from 0.3% to 2.3%. The increase was mainly due to higher spending on legal and compliance services. (P19)
Interpretation: In the first half of 2025, professional fees increased by RMB 125 million (around USD 17 million), with the report attributing the rise primarily to legal and compliance services. Although the precise share of compliance spending was not disclosed, the fact that it was highlighted in the report suggests it was significant. In today’s compliance landscape, the only projects large enough to justify such spending are in the U.S. market.
IV. R&D
Smoore focused on strategic tracks, improving R&D efficiency and optimizing resource allocation. As part of this strategy, the group prioritized key R&D projects while reducing investment in vaping products. (P5)
The company concentrated on boosting R&D efficiency, prioritizing investment in HNB products and vapor-based medical applications. (P8)
Interpretation: For a leading enterprise like Smoore, cutting R&D investment in vaping products indicates that no fundamental breakthroughs or disruptive innovations are expected in this field in the short term. Competition in vaping will therefore become increasingly intense at the market and consumer levels, further accelerating consolidation across the supply chain, market, and consumer base.
V. Comparison with the 2024 Annual Report
When compared with the 2024 full-year report (published in March 2025), the interim report introduced new formulations on several major issues. Key points include:
1. Business More Focused
In its 2025H1 report, Smoore divided its business into two categories: ToB operations and self-owned brands. By contrast, the 2024FY and 2023FY reports categorized business into three models.
● 2025H1 (P4):
Smoore, as a global leader in vapor technology solutions, operated two business segments during the review period:
(1) ToB operations, focusing on research, design, and manufacturing of vapor products, HNB products, special-purpose vapor products, and vapor medical products for leading global tobacco companies, independent vapor brands, and other enterprise clients, as well as related technical services;
(2) Self-owned brands, focusing on research, design, manufacturing, and sales of proprietary vapor and vapor beauty products.
● 2024FY (P10):
Smoore, as a global leader in vapor technology solutions, derived revenue from three business models:
(1) Researching, designing, and manufacturing closed-system vapor products, HNB products, and components for special-purpose vapor products for leading global tobacco companies, independent vapor brands, and other enterprise clients;
(2) Researching, designing, manufacturing, and selling self-owned vapor and vapor beauty products for retail customers;
(3) Providing R&D services to clients based on the company’s vapor technology reserves.
2. From Strategy-Making to Strategy Execution in Just Six Months
Another notable difference lies in the articulation of future strategy. At the start of 2025, statements focused more on strategic vision. By mid-year, the report detailed specific strategies and execution plans.
It could be said:
● In 2024, Smoore understood what to do.
● In 2025, Smoore set about doing it.
● 2024FY (P7):
“2025 is a critical year for realizing our second growth curve. We will continue to invest in core product R&D to deliver more competitive innovations for users. We are committed to optimizing and decentralizing organizational structure, granting greater authority to frontline operations, advancing organizational and operational frontlines, and enabling faster, market-oriented decision-making.”
● 2025H1 (P12):
“In the second half of 2025, the focus will be on accelerating commercialization of technology platforms while continuing to invest in R&D projects of strategic commercial value. Guided by market demand, the group aims to resolve core technical challenges and consumer pain points. We will continue to prioritize R&D in HNB products and vapor-based medical solutions, focusing on building technological barriers and advancing commercialization. In the vaping segment, we will concentrate on key technologies to develop platforms offering superior consumer experiences and plan to launch several competitive new products.”
Smoore will also continue to leverage its technological and manufacturing expertise to strengthen market insights, adapt to emerging trends, and deliver innovative, compliant products that meet evolving customer and consumer needs. (2025H1.P11)
VI. The Missing Piece: Tobacco Harm Reduction Science
One striking omission from Smoore’s report is any discussion of nicotine science or tobacco harm reduction research. There is no reference to studies on product safety, harm reduction potential, or abuse prevention. The silence suggests that in the heat of competition, companies remain consumed with survival, leaving little capacity to engage with the deeper harm reduction needs of tobacco consumers.
I have no doubt that Smoore is investing in this field. Yet the fact that the report goes into detail about matters such as employee training while neglecting to mention this issue speaks volumes. For both the industry and the investment community, nicotine science is clearly not a priority.
My view is clear: science is the only true foundation for the legitimacy and necessity of the global NGP industry. It is also the one variable with the potential to upend the competitive landscape. And today, nicotine and harm reduction research remain the most glaring weakness of China’s supply chain.
Contact
For further discussion:
Alan Zhao
Email: Alan@2firsts.com
