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Electronic Cigarette Sales Surpass the $1B Mark

NATIONAL REPORT -- Combined sales of electronic cigarettes -- both from online and at brick-and-mortar stores -- have exceeded the $1-billion mark and could reach $1.7 billion to close out the year.

"Conservative data indicates that traditional electronic cigarette retail sales on an annualized basis [are] $700 million," said Bonnie Herzog, managing director of tobacco, beverage and consumer research at Wells Fargo Securities LLC. "When combined with online sales, the industry has now exceeded $1 billion for the first time ever, with the consumption of e-cigs likely surpassing that of traditional cigarettes in the next decade."

Herzog told CNBC that increased awareness and the lower price point of e-cigarettes are key drivers in the recent rise of the alternative tobacco product. "A lot of the awareness is the perceived lower health risks and definitely, the affordability," said Herzog, adding that the ability to use e-cigarettes in locations where traditional cigarettes are banned is yet another factor.

Despite reaching $1 billion in sales, e-cigarettes still lag behind sales of traditional tobacco cigarettes, which are approximately $80 billion a year, the report noted.

If sales hit $1.7 billion by the end of the year, that would amount to a 240-percent increase over 2012's estimated $500-million sales mark.

Specifically looking at online sales, Miami-based electronic cigarette company V2 Cigs expects this year’s online sales figure to be an estimated $500 million to $625 million. Established as an online-first retailer in 2009, V2 partnered with National Tobacco Co. in April to distribute its e-cigarette products to traditional retail outlets across the United States. Through that partnership, V2 products are now sold in more than 10,000 outlets, including Hess gas stations.

The company said it will be fully deployed in no less than 35,000 retail locations by December.

"Over the past few years, traditional retail brands have been transitioning online, but today we're seeing a new trend with the most successful online brands moving into retail," said Andries Verleur, CEO of V2 Cigs.

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