Fun Vibe, Serious Purpose

June’s Vapor Expo International (VEI) event was evidence of the rapidly evolving world of vapor. Expanded with 20 percent more exhibitor space than in 2014, the second-annual show emitted a fun vapor vibe but with a somber purpose.

“There’s a shift taking place; this is a serious business-to-business show that addresses the industry’s burning issues,” said Ed O’Connor, president and CEO of Tobacco Media Group International Inc., which produces the event.

The two-day show kicked off with a legal/analyst double-header perspective, offering industry overviews from Bryan Haynes, a partner with Troutman Sanders law firm specializing in tobacco, and Bonnie Herzog, managing director of Wells Fargo Securities LLC.

Haynes cut right to the chase with his take on what’s been weighing heavy on showgoers’ minds for over a year: the expectation for finalizing the Food and Drug Administration’s (FDA) deeming regulations proposed last April.

“They said they’d hoped to finalize them by June; my expectation is they will be finalized this year, but then they still have to go through the White House Office of Management and Budget for review,” Haynes expressed. And he reminded the audience in tongue-in-cheek fashion, “there’s normal time, government time and FDA time.”

Regarding Feb. 15, 2007, the so-called “grandfather date” of the pre-market tobacco application review process, Haynes believes there’s a “good chance” the FDA will change that for vapor products. “Every week, we hear about new products coming out, and innovation is the key to this industry,” Haynes stated, making the point that he believes the FDA understands that if they want to encourage “less risky” products, they also need to encourage more attractive and continually more advanced products.

Haynes also said it’s important to note the deeming regulations are only a “first step process, a foundational document” and that there will be more rules to come.

He expects excise tax activity to start heating up soon as well. “There’s been proposals at the state level, but only two have passed,” he told the VEI audience. States are struggling over what is the fair and best way to maximize their revenue, weighing the various ways of taxing e-liquids, currently either as a percentage of the wholesale price or cost per milliliter.

The industry will also continue to see proposals that limit youth access to vapor products, according to Haynes.

“Contrary to popular belief, the status of the regulation in this industry is not the Wild, Wild West,” he cautioned. “A lot of regulation applies to you already, and you need to understand how [new regulation] will apply to you in the future.”

Some of the ways Haynes advises the manufacturing community of the vapor industry to prepare and stay on top of regulation is to:

• Compile ingredient lists;
• Strengthen relationships with industry partners and suppliers; and
• Continue to set and adhere to self-regulating standards.

Companies also need to figure out who’s going to be responsible for compliance and “ideally, you will have that in a contract. Pointing fingers does not work,” he said.

BEING PROACTIVE

Calling vapor a “very fast-moving category,” Herzog gave an update on the current marketplace. The global market for vapor products is expected to be $7.3 billion by the end of 2015, she said based on Wells Fargo’s independent vapor manufacturer survey.

Other stats Herzog shared include:

• There are more than 19,000 vape shops globally, of which more than half are in the United States.
• 52 percent of convenience store retailers believe vape shops are negatively impacting their electronic cigarette sales.
• Retailers believe greater regulation is needed for vape shops.
• Vapor/e-cigarette category growth has moderated, growing 8 percent annually in the convenience channel.
• Technology must improve for e-cigarette category growth to re-accelerate.

VEI attendees were encouraged to be proactive in representing the industry to legislators and in adopting best practices in the manufacturing and retailing of vapor products.

Retailers need to ensure they are buying from suppliers who are currently adhering to best practices, said Cynthia Cabrera, executive director of the Smoke-Free Alternatives Trade Association. She took part in an industry association panel discussion alongside representatives from the Tobacco Vapor Electronic Cigarette Association, Tobacco Merchants Association, and the American E-Liquid Manufacturers Standards Association (AEMSA).

If retailers are also manufacturing their own products, they need to find a good contract manufacturer or verse themselves in all the potential requirements that could come, Cabrera suggested. “Familiarize yourself with the different good manufacturing practices (GMPs) and with standards and procedures. If you are a retailer who is strictly selling, start vetting out your supply chain and make sure the people you are buying from will be here in the long term.”

VEI attendees were urged, too, to get involved in educating legislators to support efforts to conduct research on the health benefits of vaping and ultimately adopt exemplary business practices.

“Right now, there has been so much bad media out there that it’s scaring people away from these products and back to tobacco,” commented Lou Ritter, co-founder of AEMSA. “This industry can and needs to work together to fund research.”

Anecdotal evidence will not fly on its own in this category, the panelists cautioned. “As a retailer, you can talk about your personal story and how you feel vaping benefited you personally, but be sure that you and anyone working at your store steers clear of offering medical advice,” Cabrera stressed to the VEI audience.

Ultimately, the panelists agree the industry needs to get more involved to steer its own fate.

What can be done? Join or initiate grassroots efforts to educate local and state legislators; support and tout research that will provide science-based data the FDA requires to understand vapor products; and hold your own company — and those who supply you — to the highest possible GMP standards in the absence of set standards that are, no doubt, coming.