HONG KONG - Golden Dragon Group (Holdings) Ltd., purveyors of the world's
first "electronic cigarette", expects sales to double in 2007 as it expands
overseas and some of China's legions of smokers try to kick the habit.
The firm hopes its Ruyan "e-cigarettes" -- battery-powered, cigarette-shaped
devices that deliver nicotine when inhaled and otherwise hope to emulate the
smoking experience -- can find a market as tobacco substitutes, for health or
Local newspapers have questioned the product's safety, arguing that smokers
inhale more nicotine on average than with a bona fide cigarette. Executives say
those comparisons are misleading.
"We're a smoking replacement instead of just nicotine replacement," said
Scott Fraser, Vice President of SBT (Holdings) Co. Ltd., the Beijing firm that
first developed the e-smoking technology in 2003 and which is now controlled by
"The nicotine is delivered to the lungs within seven to 10 seconds. It feels
like a cigarette, looks like a cigarette, it even emits vapour. In many ways, it
is like an actual smoking experience, and that's what makes us different,"
Fraser told Reuters.
Ruyan -- roughly translated as "like smoking" -- products consist of a
built-in microprocessor and atomiser that combine air intake with nicotine from
a cartridge. When inhaled, it gives off a vapour that the company says is
Replacement nicotine cartridges -- good for on average 350 puffs, or around
30 cigarettes -- cost around 12 yuan ($1.56).
China -- home to 400 million smokers and a roughly US$160 billion tobacco
industry -- accounts for 65 percent of Ruyan sales. The firm estimates around 10
percent of China's smokers are attempting to quit, and averaging a 2 percent
"The United States is our next target," said Miu Nam, executive director of
SBT, adding that the United States accounts for the lion's share of the world's
US$2 billion nicotine replacement market.
The nicotine replacement market includes the likes of Pfizer and Novartis AG,
which sell more familiar products such as nicotine chewing gum, patches, and
Ruyan's e-smoking products are available in China, Israel, Turkey, Australia,
and a number of European countries, but not yet the United States. Patents are
completed or in progress for more than 40 countries including China, Austria,
Australia, Israel, Denmark, the Netherlands, Switzerland, Slovenia, and Turkey.
Goldren Dragon's sales more than doubled to HK$286.1 million in 2006, after
surging more than ten-fold to HK$135.6 million in 2005, a year after the
technology was perfected.
The e-cigarettes sell for around 1,600 yuan (US$208) apiece.
The firm currently has distributors in 140 Chinese cities, but Miu declined
to give the number of selling points worldwide.
Shares in Golden Dragon, which has a market cap of HK$981.12 million, have
more than doubled in the past 12 months.
The company has three factories in China -- in Beijing, Tianjin, and
Shenyang. It produces 300,000 smoking devices a year.
In 2006, e-smoking devices accounted for 80 percent of Golden Dragon's
business, Miu said, with the rest going to ginseng and Chinese medical products
produced by other companies that Golden Dragon controls.
Chinese media has called the technology unsafe, claiming one cartridge of
Ruyan contains 18 mg of nicotine, compared to about 1.2 mg for a typical
Golden Dragon dismissed the charges, arguing it would take much longer to go
through one cartridge than a cigarette.
"Obviously we are facing challenges with the tobacco companies," Fraser said.
Shares in Golden Dragon closed up 0.72 percent at HK$1.40 on Wednesday,
outperforming a 0.67 percent gain in the benchmark Hang Seng Index.