The Dramatic Rise of E-Cigarettes Continues

NEW YORK -- Electronic cigarettes have continued to pick up steam, with Lorillard Inc.'s blu leading the way.

In Wells Fargo Securities LLC's latest "Tobacco Talk" survey, 80 percent of respondents indicated the e-cigarettes category accelerated in the second quarter vs. the first quarter with annual growth topping 30 percent. "Tobacco Talk" polls tobacco retailers and wholesaler contacts representing more than 45,000 convenience stores.

"Retailers have become incrementally more positive on [e-cigarettes] and continue to praise blu, noting that its advertising and marketing efforts are driving growth to the entire category," said Bonnie Herzog, managing director of tobacco, beverage and consumer research at Wells Fargo Securities.

She reported that feedback was mixed on Reynolds American Inc.'s Vuse and Altria Group Inc.’s MarkTen e-cigarettes, though respondents seem to reluctantly acknowledge that the major tobacco companies have "deep pockets to [eventually] own the category."

In addition, many survey respondents noted the dual use among electronic cigarette users, with minimal full conversion from traditional cigarettes, according to Herzog.

According to Wells Fargo’s "Tobacco Talk" survey, cigarette volume growth for the industry did decelerate. However, most major brands -- especially Newport Menthol -- saw growth accelerate in the second quarter.

Herzog concluded that Wells Fargo Securities anticipated industry-reported volume to be down 5 percent in the time period, lower than the long-term industry decline rate of 3 percent to 4 percent.