Feature: A Look Into Malaysia's Unique Vaping Market

On August 12th, the Malaysia International Vape Show (Mivas) was held at the Mines Convention Center in Selangor. At the exhibition, 2FIRSTS interviewed Hafiidzzul, the Chief Operating Officer of Mivas City, the organizer of Mivas. Hafiidzzul stated that there were a total of 70 exhibitors at the Mivas electronic cigarette exhibition, most of which were brands from China, as well as some distributor companies -- after learning about new technologies and equipment from China, they introduced them to Malaysia and showcased them at the exhibition.

Malaysia - A "Testing Ground" for Vape Technology and Design

In fact, the Malaysian vape market is a "testing ground" for the development of vaping industry in China. According to Hafiidzzul, the development of Malaysia's e-cigarette market is closely related to the innovation and development of China's e-cigarette industry. The changes in the preferences of Malaysian consumers reflect the updates and changes in China. This is something that neither Indonesia nor the Philippines can do. "In these two countries, users are unwilling to change. Ten years ago, if you came to Malaysia, you would see many people smoking, but now, more people are using electronic cigarettes. Ten years ago, you would see many people smoking in Indonesia, and it is still the same today."

"Any new technology for electronic cigarettes from China is first market-validated in Malaysia, and it has always been the case. In the Philippines and Indonesia, most electronic cigarette users are still using open systems, even in the UK, open systems still exist. But now in Malaysia, it is a world of disposables, which mirrors the trend in China's industrial technology development."

Malaysia has always been following China's footsteps. Hafiidzzul stated that he first experienced electronic cigarettes in China in 2009 and decided to deeply understand the industry. He found that in 2015, China exported many open-system products, and Malaysian users started using open systems. Between 2016 and 2018, nicotine salt pod systems became popular, and Malaysian users also started using nicotine salt products. After 2020, disposables rose, and the Malaysian market began to welcome disposable products. "What will happen in the future is unknown, but I believe that if there are other product innovations in China, whether it is new designs or new technologies, Malaysia will definitely welcome them."

Hafiidzzul said, "I think the electronic cigarette exhibition is a window for export countries and target markets to understand each other. The Malaysian market has always been the "testing ground" for Chinese electronic cigarettes. As the organizer of the exhibition, Mavis's every event has many large Chinese companies and factories participating because they want to bring new products to Malaysia. If they can succeed in the Malaysian market, they are likely to succeed in other markets."

Hafiidzzul also stated that product iteration in Malaysia shows a "spiral upward" trend, as technology continues to rise, the product appearance first becomes larger (open system), then smaller (pod/disposable), and then larger (large puff disposable), forming a cycle. "So I predict that the appearance design of electronic cigarettes will return to miniaturization."

Change in Taste and Preferences of Malaysian Consumers

Hafiidzzul stated that Chinese manufacturers are skilled at adjusting their products according to local preferences, making their e-liquid seamlessly integrated into the Malaysian market. The success of these taste adjustments challenges local e-liquid producers, who now face the task of innovating and responding to constantly changing consumer demands.

In 2018 and 2019, Malaysia became the center of e-cigarette flavor diversification, considered one of the markets with the most e-cigarette flavors. The market mainly prefers cream flavors, which makes Malaysian e-cigarettes unique. However, as Chinese factories adapted to global tastes, the industry underwent a significant transformation. The current trend is towards sweeter and cooler flavors, consistent with Malaysian consumers' preference for sweets and a refreshing feeling.

Vapers in Malaysia are mainly divided into two categories. One is people who have been smoking for a long time, usually aged 35 to 50, who are looking for alternatives to quit smoking. These customers prefer flavors that are not too sweet and can make them feel like smoking. They are more inclined to look for brands that can help them quit smoking. The other type is young people who pursue trends. They may have smoked before but are not heavy smokers or have not smoked for long. They look for electronic cigarettes, not for quitting smoking but more for flavors and trends. In the past few years, when using open systems in Malaysia, e-cigarette users liked cream flavors. But when consumers turned to disposable electronic cigarettes, most people preferred fruit flavors. Malaysians like sweet and cool flavors. Indeed, fruit flavors now dominate disposable electronic cigarettes.

Manufacturers Should Eliminate Middlemen and Become Their Own Agents

Hafiidzzul stated that recently after the government announced the legalization of the e-cigarette industry in Malaysia, the Malacca state government announced that they have signed a memorandum of understanding with Chinese companies to invest in building an e-cigarette factory and a research and development center. In the future, Chinese vape companies will use Malacca as a base to radiate to the entire Southeast Asian market, and China's technology and manufacturing industries will also continue to be deeply integrated with Malaysia.

Currently, Chinese manufacturers are discussing with local companies in Malaysia how to change sales methods. He believes that now the situation is such that the government and many local companies support manufacturers to change their sales methods, get rid of middlemen, and become their own sales agents. Manufacturers can also set up brand stores directly, without intermediary links. Hafiidzzul hopes to eliminate the problems of excessive pricing and product counterfeiting caused by the intervention of middlemen. Manufacturers and distributors should be their own sales agents to better serve consumers and reduce costs.

Hafiidzzul stated that at present, with the increase in disposable e-cigarettes in the market, there are also some bad phenomena. Some manufacturers set a low price and create an illusion that they are selling very well. "But now, the Malaysian market is developing towards high-end and high-quality development, not low-end and low-quality development. Low-quality products will gradually be eliminated, and high-quality products will be welcomed by users."

Regulatory Background Drives Diverse Business Models, Becoming a Malaysian "Scenery"

During their preliminary visit and research, the two reporters discovered that several electronic cigarette shops in Malaysia operate under diverse business models, such as vape shop + shoe store, vape shop + barbershop, and vape shop + toy store, among others. (as shown in the pics below) Hafiidzzul told the reporters, "This is because electronic cigarettes were previously illegal in Malaysia, and their sale had to be bundled with other legal businesses. Before the pandemic, you could see a lot of 'e-cigarette shop + cafe' business models on the streets, but as regulations became stricter, electronic cigarettes were banned in all dining establishments, leading to the gradual decline of this model. In its place emerged the 'e-cigarette + other products' sales model."

Now, electronic cigarettes in Malaysia are about to be fully taxed and move towards compliance. However, Hafiidzzul believes that such integrated business models will not disappear, "On the contrary, they will become a unique 'scenery' in Malaysia."

Local E-liquid Manufacturers Should Seek Survival Through Collaboration with Chinese Companies

Local Malaysian e-liquid producers, which once thrived during the open-system era, face challenges amid changing market trends. Hafiidzzul stated that with the shift towards disposable devices, local manufacturers face difficulties due to the decline in e-liquid product demand. For survival, it has become crucial to adapt, innovate, and potentially enter new markets. However, there is hope for companies that seize the opportunity to collaborate with Chinese disposable device manufacturers and incorporate their unique flavors into these new products.

To maintain market presence and relevance, local Malaysian e-liquid manufacturers must consider strategic partnerships with disposable device manufacturers. By combining their expertise in flavor with the innovative design and capabilities of Chinese factories, a new avenue emerges. These partnerships can spark a series of chemical reactions that drive product innovation and attract Malaysian consumers.

The e-cigarette industry has undergone significant changes globally, and Malaysia is no exception. The revenue from the nicotine market has prompted the government to amend the 1952 Poisons Act, removing business and gel forms of nicotine substances from the poison control list, and the taxation normalization has, in effect, announced the legality of nicotine products. However, the pending status of the Tobacco Products and Smoking Control Bill introduces uncertainty, and the rationale and approach of the regulation are believed to impact the development and direction of the Malaysian e-cigarette market. As a country with a vibrant e-cigarette community and diverse flavor preferences, Malaysia's e-cigarette market has changed over the years. From open-system to disposable devices, the market has embraced change, bringing opportunities and challenges for both local and international manufacturers.