The Evolution of E-Cigarettes

1/27/2014

Inaugural E-Cig Forum spotlights move from niche product to vital part of the tobacco category

Future growth and regulation were very much on the minds of those who attended the inaugural Wells Fargo Securities E-Cig Forum, which took place Nov. 21 at the New York Palace Hotel. Both are inevitable for the electronic cigarettes segment as it continues to evolve from a niche product to a vital part of the tobacco category.

Manufacturers, investors and other industry insiders came together at the event to learn more about where e-cigarettes are headed as a group, as well as individual companies.

“Although it’s small, it is growing rapidly,” Wells Fargo Securities LLC Senior Analyst Bonnie Herzog said of the segment in her opening remarks. She believes consumption of e-cigarettes could surpass that of conventional cigarettes within the next decade and noted that e-cigarettes have been embraced by all facets of the industry, from wholesalers and retailers to resellers and Big Tobacco. Herzog also cited the fact that e-cigarettes are showing a faster growth rate than that of conventional cigarettes.

E-cigarette companies participating in the forum included: Ballantyne Brands LLC, E-Lites, Fin Branding Corp. LLC, Johnson Creek Enterprises LLC, LOGIC Technology Development LLC, Lorillard Inc., NJOY Inc., V2 Cigs, Vapor Corp. and Victory Electronic Cigarettes.

Representatives from each company took the stage to share their developments and products, and participate in fireside chat-style, question-and-answer sessions moderated by Herzog.

The forum’s public health panel featured a discussion between three industry experts — David B. Abrams, executive director of The Schroeder Institute for Tobacco Research and Policy Studies; Clive Bates, director of Counterfactual Consulting and Advocacy, and former head of Action on Smoking and Health; and Jean-Francois Etter, associate professor, Faculty of Medicine, at the University of Geneva in Switzerland. They spoke about the public perception of e-cigarettes, along with citing studies that have been conducted on the products.

Key findings include that e-cigarettes are significantly less harmful than conventional cigarettes, with mild adverse side effects such as dryness of throat and mouth, and that they provide benefits such as cash savings and product personalization.

The panel also discussed how regulation of the e-cigarette market is necessary, but should be thoughtful and promote product innovation and public education.

This call for a combination of innovation and visibility was echoed in another panel on emerging issues in the e-cigarette regulatory landscape, hosted by Lorillard Senior Vice President and Chief Compliance Officer Neil Wilcox; NJOY’s David Graham, senior vice president of International Regulatory Affairs; and Scott Ballin, a tobacco and health policy consultant.

“I think [e-cigarettes] need to be regulated…but the question is how,” said Graham. Too much regulation could inhibit innovation and the ability to take advantage of science-based products, while too little regulation could lead to abuse by some manufacturers.

The e-cigarette industry will have to wait to find out what kind of proposed regulations the Food and Drug Administration submitted to the Office of Management and Budget in October, but the panelists agreed on certain points that should be taken into consideration. Rules should provide appropriate standards for quality, with clear definitions; encourage a “robust body of research” to prevent claims of ignorance regarding how e-cigarettes function and how they differ from conventional cigarettes; and offer intelligent flexibility.

Panelists opposed the idea of applying conventional cigarette regulations to e-cigarettes, as they are designed for different purposes and don’t cause the same harm. “There needs to be a gap between tobacco regulations and e-cigarette regulations,” Graham said.

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