Changing the Game

One fact was clear to attendees of the second-annual Wells Fargo Securities E-Cig Conference: Although innovation in this segment of the tobacco industry is still young, electronic cigarette and vapor products are evolving rapidly.

“This industry has staying power and will continue to be disruptive to the tobacco industry,” Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, said during her opening remarks at the Nov. 20 event in New York.

Growth of e-products can be seen in the size of the U.S. vapor market alone — which grew from approximately $1.8 billion to $2.6 billion over the last year — and through events such as “vape” being chosen as the word of the year for 2014.

While the e-products industry remains fragmented and consolidation is likely to continue, Herzog posed a big question to the audience: With e-cigarettes seeing such rapid growth, is this the beginning of the end for combustible cigarettes?

Numerous e-cigarette and vapor companies participated, including Altria Group Inc./Nu Mark LLC.; Ballantyne Brands LLC/Mistic ECigs; International Vapor Group; Johnson Creek Enterprises LLC; Logic Technology Development; NJOY Inc.; Reynolds American Inc./VUSE; VMR Products LLC/V2 Cigs; and XEO International Ltd.

Consumer response to e-products is what sets this segment of the tobacco industry apart, according to Joe Murillo, president and general manager of Altria’s Nu Mark. “I have never seen consumers adopt or be interested in new products the way they’re interested in e-vapor,” he said.

NJOY CEO Craig Weiss expressed similar optimistic and ambitious sentiments, noting that his company is on a mission to obsolete combustible cigarettes.

The conference also included two expert panel discussions. During the Public Health Panel, Dave Dobbins, chief operating officer of the American Legacy Foundation, discussed the concept of absolute safety vs. relative safety, and how people should consider all potential harms and benefits. There may be some harm in inhaling e-liquids, but much less than in smoking combustible cigarettes, he said, and while e-cigarettes may not be safe, they are safer.

Public perception, however, is changing as a growing percentage of people perceive e-cigarettes as more harmful than the data shows, according to Dobbins.

During the Emerging Issues in the E-Cig/Vapor Regulatory Landscape Panel, Clive Bates of Counterfactual Consulting and Advocacy spoke out against new regulation. “Just about every idea so far will actually make things worse for the health of the marketplace,” he said. “Proposals on the table so far are worse than doing nothing because not much is wrong.”

If vaping is largely banned, Bates said it could do net harm because the risk to bystanders is extremely low, but the harm reduction when switching from combustible cigarettes to e-cigarettes is high. If the value proposition of e-cigarettes is lost, smokers will face further harm.

Panelists generally agreed that some regulation is necessary, but that the “sweet spot” must be found between no regulation and over-regulation.