Education, New Products Pilot Vapor World Expo

ROSEMONT, Ill. – Perfectly timed, albeit unintentionally, on the heels of the late April Food and Drug Administration (FDA) regulatory blueprint proposal for electronic cigarettes and other tobacco products, the inaugural Vapor World Expo debuted to an information-hungry crowd last week here at the Donald E. Stephens Convention Center.

The first-of-its-kind, business-to-business conference and exposition, centered on the burgeoning e-vapor market, drew more than 200 exhibitors and 1,200 attendees including product manufacturers, distributors, wholesalers and retailers. Even Rosemont Mayor Bradley A. Stephens was part of the action, joining the ribbon-cutting to kick off the show on the morning of May 7.

After attending and speaking at the two-day event, Wells Fargo Securities LLC tobacco analyst and managing director Bonnie Herzog said she is "even more excited about the vast potential of the e-vapor category,” which her estimates put at a $2.2-billion retail market in the United States (including e-cigarettes).

Herzog and Bryan Haynes, a partner with Troutman Sanders law firm, made up a double-header educational session that took two sides of the industry — Herzog from the financial realm and Haynes from the legal realm — and painted an up-to-the-minute picture of the market.

Herzog referred to the current e-vapor market as “not your father’s e-cig,” indicating in a tongue-in-cheek way how fast the market of vapors, tanks and mods (VTMs) is growing. “It is really taking off, much faster than [traditional stick-alike] e-cigs,” she said.

Herzog expects there will be a lot of winners in the vapor arena, including convenience store retailers whom she said are already buying into the category from both the independent- and chain-store levels. She cited Mistic Electronic Cigarettes bringing its Haus personal vaporizer into nearly 40,000 points of distribution in the convenience channel over the next few months.

“Though we continue to believe ‘traditional’ or ‘cig-alike’ e-cigs are here to stay, especially as the technology improves and evolves, we believe the rapid growth and staying power of VTMs serves as a wake-up call for traditional e-cig manufacturers," Herzog explained. "We believe VTMs are the wave of the future, which is both an opportunity and challenge for c-store retailers.”

So, what is the best way for retailers to merchandise the e-vapor category? Herzog reported that 50 percent of retailers currently believe in merchandising all e-cigarettes (including e-vapor products) as a separate category, preferably near conventional cigarettes. Thirty percent are merchandising them with cigarettes, and 20 percent are opting for a front-counter placement.

She concluded her analysis by giving the audience an important question to think about. “Is this the beginning of the end for combustible cigarettes?” Herzog posed.

LEGALLY SPEAKING

From the legal perspective, Haynes said the industry should be glad -- as he is -- that the proposed FDA regulations for e-cigarettes are finally out. For awhile now, the legal arena has speculated whether or not the FDA would metaphorically regulate the category with a scalpel or a sledge hammer, he said.

“My take now is it will probably be more like a regular hammer, but it’s probably not going to hit you for another two or three years,” he told Vapor World Expo attendees.

Haynes stressed the critical importance of industry players participating in the FDA's public comment period on the proposed deeming regulations.

“It could get better or worse after the comment period, so it’s critically important to get in there and tell the FDA what you think and how [the proposed regulations] will affect your business,” he stated.

Haynes went through all the major points of the proposed regulations, including “new tobacco” product requirements, modified risk provisions, testing requirements, warnings, tobacco products standards, flavors, remote sales, good manufacturing practices, and advertising and marketing restrictions.

The proposed FDA regulations were also addressed during another educational session at the event that brought together an esteemed panel of industry experts, including Tom Kiklas of the Tobacco Vapor Electronic Cigarette Association, Bill Bartkowski of VapAria, Cynthia Cabrera of the Smoke Free Alternatives Trade Association, Linc Williams of the American E-Liquid Manufacturing Standards Association, and Armaud Duma de Rauly of France’s FIVAP. The panelists discussed what is good about the regulations, what is not so good, and what the industry should do to prepare.

Two breakfast educational sessions (one on each morning of the show) were presented to packed crowds, and both had Q&A periods that extended well beyond the allotted 30 minutes, with attendees lining up after the sessions officially ended to meet and question the speakers one on one.