E-cigarettes Smoking the Tobacco Market

E-cigarette

Electronic cigarettes, informally referred to as e-cigarettes or e-cigs, are asserting themselves as a force to be reckoned with, in terms of health and profit. Along with long standing methods of smoking cessation such as nicotine gum and patches, the new product is being hailed by many as a great way to give up actual cigarettes. Riding the latest wave of tobacco alternatives are savvy businesspeople; e-cigarettes and e-cigarette lounges are making some serious noise in the market, to the tune of more than $1.5 billion last year.

Sam Nelson of Kentucky owns two vapor bars in his home state, and hopes to open a third. In speaking of his clients who make the change from cigarettes to e-cigarettes, Nelson states that many clients are so impressed with the new service that his stores are often “standing room only.” Meshaila Connors of Nova Scotia says that her store, The End Vapor, did more than $500,000 in sales in less than six months.

Some of those who try e-cigarettes are so impressed that they open their own business shortly afterward. This is what happened to Timothy Braun, and Eric Totten of Rockaway, NJ. The friends opened Quantum Vapor after converting from cigarette smoking to vaping. Prior to their discovery of electronic cigarettes, Braun smoked two and a half packs per day and Totten smoked over a pack a day.

In spite of the sudden growth in e-cigarette market, it still only represents a small fraction of the revenue generated by actual tobacco products. However, Bloomberg Businessweek comments that sales of e-cigarette related products may surpass traditional cigarettes by the year 2023. In light of the recent sales, and the amount of potential for growth, this is very possible. The new electronic substitute has two advantages over traditional cigarettes. First, e-cigarettes can be shipped directly to the smoker’s home, unlike cigarettes. Second, they come in a myriad of actual flavors such as Peach Schnapps, Java Jolt, Vivid Vanilla. To date, traditional cigarettes are limited to the simple “cigarette” flavor. Customers in a brick and mortar store front can sample different flavors for free. The staff can also help the customer experiment with different flavors, much like a coffee-house barrista.

Unlike traditional tobacco products, electronic cigarettes offer the purchaser a choice of vaping with or without nicotine. For smokers who want to vape in order to quit cigarettes, servings of nicotine are available in quantities up to 24 milligrams; 24 milligrams of nicotine is the legal limit in cigarettes. For those who simply enjoy a good drag, but want to avoid the powerful nicotine drug, “juice,” as the flavored contents are called, is also available without nicotine. However, nicotine-free juice must typically be bought, and is not available as a free sample.

Tobacco industry giants such as RJ Reynolds and Lorillard have made major moves into the e-cigarette industry. Lorillard Tobacco Company bought e-cig industry leader Blu for $135 million. The Greensboro, NC. Based company increased distribution of Blu to more than 125,000 stores. Despite this, Blomberg Businessweek reports that the longstanding tobacco powerhouses may want to avoid cannibalization via too much investment in e-cigarettes, at least for the moment.

The electronic cigarette industry appears to be in the middle of a strong market growth. As long as major tobacco companies tread lightly into the semi-virgin territory, small companies have a lot of room to grow. E-cigarettes may indeed smoke one past the cigarette industry.

By Ian Erickson
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