The Burning Issues Around Vapor

ROSEMONT, Ill. — Vapor Expo International (VEI), held this week in Rosemont, was evidence of the evolving world of vapor products. Expanded with 20 percent more exhibitor space than 2014, the second-annual show emitted a fun vapor vibe but with a very sober purpose.

“There’s a shift taking place; this is a serious business-to-business show that addresses the industry’s burning issues,” Ed O’Connor, president and CEO of Tobacco Media Group (TMG) International Inc., told CSNews Online. TMG produces the event.

The show kicked off Wednesday with a legal/analyst double-header perspective, offering industry overviews from Bryan Haynes, a partner with Troutman Sanders law firm specializing in tobacco, and Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC.

Haynes cut right to the chase with his take on what’s been heavy on showgoers’ minds for over a year: the expectation for finalizing the FDA’s deeming regulations proposed last April.

“They said they’d hoped to finalize them by June; my expectation is they will be finalized this year, but then they still have to go through the White House Office of Management and Budget (OMB) for review,” Haynes expressed. And he reminded the audience in tongue-in-cheek fashion, “there’s normal time, government time and FDA time.”

Regarding Feb. 15, 2007, the so-called “grandfather date” of the pre-market tobacco application (PMTA) review process, Haynes believes there’s a “good chance” the FDA will change that for e-vapor products.

“Every week, we hear about new products coming out and innovation is the key to this industry,” Haynes stated, making the point that he believes the FDA understands that to encourage “less risky” products, they need to encourage more attractive and continually more advanced products.

Haynes also said it is important to note the deeming regulations are only a “first-step process — a foundational document” and therefore there will be more regulation to come later.

He expects excise tax activity to start heating up soon as well. “There’s been proposals at the state level, but only two have passed,” he told the VEI audience. States are struggling over what is the fair and best way to maximize their revenue, weighing the various ways of taxing e-liquids, as either a percentage of the wholesale price or cost per milliliter.

The industry will also continue to see proposals that limit youth access to e-vapor products. “Contrary to popular belief, the status of the regulation in this industry is not the Wild Wild West,” Haynes cautioned. “A lot of regulation applies to you already, and you need to understand how [new regulation] will apply to you in the future.”

Some of the ways Haynes advises the manufacturing community of the e-vapor industry to prepare and stay on top of regulation is to: compile ingredient lists; strengthen relationships with industry partners and suppliers; and continue to set and adhere to self-regulating standards.

Companies need to figure out who’s going to be responsible for compliance and “ideally you will have that in a contract. Pointing fingers does not work,” he said.

Meanwhile, Herzog characterized vapor as a “very fast-moving category” and gave her update, including:

• The global market for vapor products is expected to be $7.3 billion by the end of 2015, according to Wells Fargo’s Independent Vapor Manufacturer survey. 
• There are more than 19,000 vape shops globally, of which more than half are in the United States.
• 52 percent of c-store retailers believe vape shops are negatively impacting their e-cig sales.
• Retailers believe greater regulation is needed for vape shops. 
• Vapor/e-cig category growth has moderated, growing 8 percent annually in the convenience store channel.
• Technology must improve for e-cig category growth to re-accelerate.