and this does not help-
July 22, 2014, 4:50 p.m. EDT
E-cigarettes may not be the savior of the tobacco industry
By Angela Johnson
E-cigarettes have been heralded as a potential savior for a tobacco industry desperate for new products and customers in the face of a shrinking number of smokers and punitive damages such as the $23.6 billion awarded by a Florida jury last week.
But it turns out that regular smokers prefer the real thing.
“There is consumer dissatisfaction with the product, which leads to high levels of rejection” said Vivian Azer, tobacco and beverages analyst at Cowen & Co. in New York. “Consumers are willing to try the product, but they are not satisfied.”
Indeed, U.S. sales of e-cigs, which look similar to a traditional cigarette, but use a battery to vaporize rather than burn the nicotine, have been declining for the past several months.
According to Nielsen convenience-store data, e-cig sales declined 17% in the period ending June 7. What’s more, prices have been negative for six sequential monthly periods, driven by unit declines of 2.8% and lower year-over-year net pricing of 14.2%.
Bonnie Herzog, a senior analyst at Wells Fargo & Co., said the drop in sales tells only part of the story.
“We believe the negative pricing trends could be due to increased penetration of kits which offer a lower price/cartomizer.” The average price per unit was $5.64.
Cartomizers are disposable cartridges with atomizers built into them. The idea is that there is a brand new atomizer in each cartomizer offering maximum vapor production, according to a description on the website of My Vapor Store, an online electronic cigarette superstore.
“Further, we believe the sales decline is more reflective of volume moving to vapors-tanks-mods, which tend to be sold in non-tracked channels, especially vape shops,” said Herzog. Vape shops are storefront locations that cater to the vaping community.
There are still many questions about the health implications of e-cigs In April The Food and Drug Administration announced a proposal to deem e-cigarettes a “Tobacco Product” which means it can treat the e-electronic product the same as traditional cigarettes.
Lorillard Inc. LO +0.02% controlled 42% of convenience store e-cigarette sales market with its Blu e-cigarette product before it was acquired by Reynolds American Inc. RAI -0.31% last week. As part of the merger, Reynolds said it is selling Blu to Imperial Tobacco UK:IMT -0.72% to stave off anti-trust regulators as well as to promote its own e-cigarette brand, VUSE.
Brand Logic is in second place in convenience store sales with a 25.5% share of sales and NJOY comes in third with a 10% share, according to Wells Fargo Securities Nielsen Convenience Store Data. The size of the vapor market as a whole is $2.5 billion, with e-cigarettes accounting for $1.4 billion of that total.
Tobacco companies are still facing thousands of lawsuits from former smokers and the families of dead smokers in wrongful death suits.
Last week, a Florida jury told Reynolds., the nation’s No. 2 cigarette manufacturer, to pay $23.6 billion to the widow of a smoker who died of lung cancer. Legal experts expect that sum to be greatly scaled back, either by the judge in the case, or on appeal.
But the case highlights that the public continue to blame tobacco companies for the impact their products have on human health.
