Vapor Group Inc (VPOR)

[TheSittingtight1]

Any one consider this attack could be from big tobacco and other ecig co.?

http://www.csdecisions.com/2014/03/21/e-cigarette-sales-set-surge-2014/?utm_source=rss&utm_medium=rss&utm_campaign=e-cigarette-sales-set-surge-2014#_

E-Cigarette Sales Set to Surge in 2014
March 21, 2014 CSD Staff : 0 Comments

ecigarettesEven though e-cigarette category dollar sales started 2014 with slight deceleration, growth is expected to remain “robust” going forward, according to Wells Fargo Securities.

The convenience store channel saw $45.2 million in sales over the four weeks ended Jan. 18, 2014, plus e-cigs accounted for another $12.4 million in national, cross-outlet markets. “This implies about $750 million in annual sales in Nielsen-tracked channels and we believe e-cig sales in non-Nielsen tracked channels (such as vapor shops and boutiques) plus online sales ($500-625 million) suggest the category is now about a $1.85 billion category,” said Bonnie Herzog, managing director of beverage, tobacco and convenience store research for Wells Fargo Securities.

Furthermore, Herzog said, her research suggests that the tank-style vaporizers are underrepresented in the Nielsen data and continue to grow faster than the category. “We continue to believe that e-cig consumption could surpass traditional cigs and the combined operating profit pool could generate an annual growth rate in excess of 7% over the next decade,” she said.

Wells Fargo Securities reported that Lorillard’s blu stood out as the e-cig category leader in the c–store channel, with 40.6% dollar share, followed by NJOY with 26.5% share and Logic at 15.7% share for the 52 weeks ended Jan. 18, 2014.

“E-cigarette dollar sales growth decelerated slightly to 45% in the period ended Jan. 18, 2014, driven by accelerated unit growth of 54.8%. This was partially offset by lower net pricing, which was down 6.3%—the category’s first negative pricing,” Herzog said.

The average price per unit was $6.34, for the same 52 weeks. “Though we don’t like to see negative pricing, we believe this could be due to increased penetration of kits, which offer a lower price per cartomizer,” Herzog said.

The cartomizer cost should continue to trend down over time because of a volume shift to multipacks as leading brands, including blu, NJOY and Vuse (set to roll out nationally in 2014), are coming out with starter kits at attractive prices.

Retailer Excitement
Rockland, Mass.-based Tedeschi Food Shops, which offers the three top selling e-cigarette brands Blu, NJOY and Logic disposables and rechargables, noticed the deceleration.

“Sales had leveled off in the fourth quarter of 2013, but the momentum seems to be back in 2014,” said Steve Monaco, director of purchasing for Tedeschi, which operates 191 c-stores in Massachusetts and New Hampshire.

Despite the upswing, however, 2014 is pushing legislative challenges. New York City and Chicago made headlines as they extended their public smoking bans to include e-cigarettes, a trend Monaco expects to see continue.

“Unfortunately, due to the lack of education on the part of our politicians, they feel it just seems like the right thing to do,” he said. “And it really isn’t.”
Matthew Paduano, vice president of category management for Nice N Easy Grocery Shoppes Inc. in Canastota, N.Y., noted that despite the regulations in nearby New York City, he doesn’t anticipate that restrictions will hit upstate New York anytime soon.

“My big concern is the state will try to tax e-cigs like they do all tobacco products. When this happens, we can expect a drop in sales depending on how far the state goes with taxation,” Paduano said.

For the balance of 2014, Paduano said he expects sales of e-cigs to continue to grow double digits, especially with increased e-cigarette offerings across all Nice N Easy stores. The chain is in the process of expanding its offering to include more brands and additional varieties.

“We do carry products from blu, Logic, NJOY, Metro, Mistic, Swisher, Criss Cross, Krave, V2 and FIN. We have also invested in custom fixtures that we are currently rolling out to our stores,” Paduano said. “We also rely on our wholesaler, Pine State Trading, who is very proactive in this segment. You have to have the brands your customers want.”

One note of caution that has Paduano, and others, concerned, is the potential that there will be brand attrition as the big tobacco companies jump into the segment and the Food and Drug Administration announces its long-awaited e-cigarette deeming regulations, which were still not available at presstime.

“While I think sales will continue to grow in this category, I anticipate a ‘thinning of the herd’ once the FDA comes out with its mandates,” he said. “I expect Altria and RJ Reynolds to roll out their offerings, but I also expect to see some margin erosion when this happens, since I anticipate requirements for more aggressive retails from them.”

A Win for Retail Sales
While electronic smokes are doing well at the register, they can perplex retailers. “The toughest challenge for the buyers is deciding which brands to carry,” said Myers of Kocolene Marketing. “It’s almost like the energy drink category. A new brand hits the market and then the store doesn’t stay in stock on the brand it has carried for a year.”

The retailers’ next big challenge with e-cigs will be proper merchandising. “Most stores don’t have room for fixtures from all the various brands,” Myers said. Despite a premium on counter space, some operators believe e-cigs should be on the front counter so consumers can see and touch the product. Lorillard has created back-bar signage for its brand and incentivizes retailers with a cigarette-like monthly payment. The in-store displays speak also to non-smokers who are unfamiliar with the product and how it operates.

It’s early in the life of the e-cig, and the general public doesn’t yet understand them, according to Lisa Dell’Alba, president of Square One Markets, a nine-store chain in Pennsylvania. “People aren’t sure where they can consume them or what answer they can give when people say, ‘Hey, that’s harmful to me.’ Tobacco as we know it is changing. In a few years, the back bar is going to look very different.” ?

E-Cigs dollar share up at c-stores
Lorillard leads the E-cigarette category across the board, followed by LOGIC and NJOY. Dollar share and unit share were up across the top 12 brands for the 52 weeks ended Jan 18, 2014.



Source: Nielsen C-Track Data Base and Wells Fargo Securities, 52 Weeks Ended Jan. 18, 2014