Analyst Says E-Cigarette Consumption Could Overtake That of Analogs within the Next Decade

They came from nowhere, but now electronic cigarettes are now being touted as the wave of the future. Their exponential growth during the last few years and constant manufacturing and packaging innovation have experts convinced they will overtake tobacco cigarettes within the next decade.

According to Tom Kiklas, co-founder and spokesman for the Tobacco Vapor Electronic Cigarette Association (TVECA), there are currently 1.5 million e-cig users in America, an ego t 300x225 Analyst Says E Cigarette Consumption Could Overtake That of Analogs within the Next Decade
unimpressive number compared to the 46 million hooked on analogs. But the big difference between the two is e-cigarettes are growing while tobacco cigs have been on the decline for a few years now. Although the electronic cigarette industry is still in its infancy, Kiklas expects it to break the $1 billion barrier in just 5-years’ time. They have two key elements going for them right now: the health benefits perceived by consumers and the constant manufacturing innovation. The FDA forbids e-cig suppliers to advertise their products using health-related claims, but no one is preventing users from doing so, and as we all know, word of mouth is a very powerful marketing tool. In terms of innovation, although the principle by which e-cigarettes work has remained almost unchanged since their invention in 2003, there have been multiple breakthroughs in both looks, usability and packaging.

Bonnie Herzog, senior market analyst at Wells Fargo, is a bit more reserved than Kiklas, but she also believes electronic cigarettes show a great deal of potential in the convenience sector. “It’s a fairly new category, and that’s what I find so exciting,” she told Convenience Store Decisions. “I’m making some pretty big predictions. I think it’s possible that consumption of e-cigarettes could surpass that of traditional cigarettes within the next decade.” Just like other analysts before her, she compared the rise of these innovative devices to that of energy drinks in the beverages sector. They too started out as a niche segment and quickly transformed into a $1.5 billion market that’s expected to reach $2 billion in annual retail sales by 2016. Herzog compares e-cigs to energy drinks in terms of growth, profit potential and buzz. Everyone’s talking about them right now, and despite some negative publicity, most people tend to respond positively to electronic cigarettes. Another strong signal e-cigs may have the same success as new age drinks is the big players’ interest in them. Earlier this year, Big Tobacco company Lorillard acquired Blu, one of the leading e-cigarettes suppliers on the market, and other big brands are expected to follow suit.

Another characteristic that Herzog says makes e-cigs so appealing right now is their similarity to conventional cigarettes. “E-cigarettes are a very small category right now, but because the product’s attributes are so similar to traditional cigarettes, this makes them very attractive to existing smokers. The operative assumption is that the risk is reduced because you’re inhaling vapor. The notion that they offer the same sensation with less harm is an attractive proposition to a large group of consumers.” Not to mention they are a cheaper alternative to smoking, and can be used almost everywhere without the risk of second-hand smoke. As the findings of the IVAQS study recently showed, there’s no apparent risk to humans from second hand vapor.

However, the electronic cigarettes’ exponential growth may be slowed down by the FDA’s decision to regulate them as tobacco products and states putting restrictions in place. E-cigarette importers will need have tobacco importing licenses, and sellers will have to have tobacco licenses in all 50 states, plus the taxes for these products will also grow considerably. “We have no problem with the taxing of the product, but you have to tax it at the level of harm that it does, and it’s a less harmful product than a traditional tobacco cigarette,” Tom Kiklas said. “So if you’re going to tax it, tax it at that level, and that level would be not very high.”

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