The Game-Changer of Tobacco: E-Products
NEW YORK — One fact was clear to attendees of the second annual Wells Fargo Securities E-Cig Conference: Although innovation in this segment of the tobacco industry is still young, electronic cigarette and vapor products are evolving rapidly.
"This industry has staying power and will continue to be disruptive to the tobacco industry," Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities, said during her opening remarks.
Growth of e-products can be seen in the size of the U.S. market — which grew from approximately $1.8 billion to $2.6 billion over the last year — and through events such as "vape" being chosen as the word of the year for 2014, as CSNews Online previously reported.
While the e-products industry remains very fragmented and consolidation is likely to continue, Herzog posed a big question to the audience: With e-cigarettes seeing such rapid growth, is this the beginning of the end for combustible cigarettes?
Numerous e-cigarette and vapor companies took the stage to share how they've evolved and innovated, as well as discuss the current and future state of the industry. Participating companies included:
- Altria Group Inc./Nu Mark LLC
- Ballantyne Brands LLC/Mistic ECigs
- International Vapor Group
- Johnson Creek Enterprises LLC
- LOGIC Technology Development
- NJOY Inc.
- Reynolds American Inc./Vuse
- VMR Products LLC/V2 Cigs
- XEO International Ltd.
Consumer response to e-products is what sets this segment of the tobacco industry apart, according to Joe Murillo, president and general manager of Altria's Nu Mark LLC. "I have never seen consumers adopt or be interested in new products the way they're interested in e-vapor," he said.
NJOY CEO Craig Weiss expressed similar optimistic and ambitious sentiments, noting that his company is on a mission to obsolete combustible cigarettes
Several company representatives agreed the winning e-product has not yet been invented.
The conference included two expert panel discussions. During the Public Health Panel, Dave Dobbins, chief operating officer of the American Legacy Foundation, discussed the concept of absolute safety vs. relative safety, and how people should consider all potential harms and benefits.
There may be some harm in inhaling e-liquids, but much less than in smoking combustible cigarettes, he said, and while e-cigarettes may not be safe, they are safer. However, public perception is changing as a growing percentage of people perceive e-cigarettes as more harmful than the data shows, according to Dobbins.
Deborah Arnott, CEO of the United Kingdom-based Action on Smoking and Health, touched on the problem of debates about e-cigarettes being based on gut-level intuition rather than the facts. Flavored e-products have been attacked for appealing specifically to children, but as panelists noted, adults also enjoy flavors like chocolate.
During the Emerging Issues in the E-Cig/Vapor Regulatory Landscape panel, Clive Bates of Counterfactual Consulting and Advocacy spoke out against new regulation of the e-cigarette industry. "Just about every idea so far will actually make things worse for the health of the marketplace," he said. "Proposals on the table so far are worse than doing nothing because not much is wrong."
If vaping is largely banned, Bates said it could do net harm because the risk to bystanders is extremely low but the harm reduction when switching from combustible cigarettes to e-cigarettes is high. If the value proposition of e-cigarettes is lost, smokers will face further harm.
Panelists generally agreed that some regulation is necessary, but that the "sweet spot" must be found between no regulation and over-regulation.
The E-Cig Conference also saw some new product announcements.
Ballantyne Brands' Chief Operating Officer Todd Millard previewed the Mistic Bridge with HAUS technology, a cig-alike compatible personal vaporizer that combines an open tank system's flexibility with the convenience of a cigarette-like configuration. Users will be able to choose from 12 HAUS blends or vape their own e-juices, which fills "a consumer need that's not being met," he said.
The Mistic Bridge will launch with a nationwide manufacturer coupon initiative on Black Friday, Nov. 28.
Johnson Creek Enterprises CEO Christian Berkey also introduced Founder's Reserve e-liquid, a whiskey barrel-aged smoke juice set to launch in early 2015.