Can E-Cigarette Companies Resist Big Tobacco’s Push into the Market?

Posted by: Vranks on November 21, 2013 Under: E-Cig News

Back when tobacco companies were still swimming against the tide, trying to get electronic cigarettes banned and constantly putting in a bad light, everyone seemed convinced these revolutionary devices had the potential to finally put Big Tobacco out of business. But ever since tobacco giants realized they were fighting a losing battle and adopted a “if you can’t beat’em, join’em” strategy, it’s becoming more and more clear that the e-cigarette market is set to soon fall into the hands of traditional cigarette makers.

There are still a few who believe major e-cigarette brands still have an advantage over Big Tobacco as far as the vaping sector is concerned, after getting a head start in the business, but the recently released e-cigarette sales data from Colorado shows they’re just being unreasonably optimistic. Why is the data from one US State so important, you ask? Well, because Colorado was chosen as the test market for R. J. Reynolds’ VUSE e-cigarette. On a national level, Lorillard-owned Blu e-cigs and NJOY are the best selling brands, but in just 16 weeks, the VUSE has managed to take over half the e-cigarette market in Colorado, leaving its rivals in the dust. According to the sales figures presented on Monday, during an investor conference, R.J. Reynolds’ electronic cigarette has built a 55.6% retail market share in the state, leaving Bly with 25.6% and NJOY with just 7.3%.

Reynolds has announced its plans to launch the VUSE nationally in the first half of 2014, and if the Colorado experience is a taste of things to come, e-cigarette brands have a lot to be worried about. Especially since Altria, the biggest US tobacco company and maker of Marlboro, is currently testing its own electronic cigarette, NuMark, in Indiana, and plans to expand to Arizona, next month. If Lorillard and R.J. Reynolds’ results are anything to go by, Altria will catch up to its rivals very quickly, and the three will share most of the e-cigarette market among themselves.

Even under current conditions, e-cigarette companies have their work cut out for them trying to resist Big Tobacco’s push, as it’s almost impossible to compete with their deep pockets, extensive distribution networks, and already established client base. In Colorado, the VUSE was sold through 1,800 retail outlets, and nationally, R.J. Reynolds can rely on 12 million tobacco customers to whom it can market directly, something that no electronic cigarette company has. Ever since it was bought by Lorillard, Blu sales have been growing exponentially thanks mostly to the tobacco giant’s chain of distribution and aggressive marketing campaigns. But things could get even worse for independent e-cigarette brands if the FDA chooses to issue heavy regulations, thus virtually handing the e-cigarette industry to Big Tobacco. Cigarette makers are already taking over the market, but if small companies would be denied the right to sell their e-cigarettes online (where Big Tobacco’s presence is virtually non-existent) or have to get expensive licenses, most of them would simply go out of business.

Anyway you look at it, the tobacco companies seems se to dominate the electronic cigarette market. I just hope some real e-cigarette companies survive the coming onslaught, just so we’re not all forced to choose between a handful of options, all sold by tobacco companies.

Source: WSJ