Table of Contents
Big Tobacco and eCigarettes Just Don’t Mix
Something has been bothering me lately about Big Tobacco’s foray into the electronic cigarette industry. For the past three months or so I’ve had this ‘mental twitch’ going on every time I heard or read something about Big Tobacco companies and eCigarettes.
Last week I found out what it was. It crystalized in front of me after I had read that Lorillard’s Blu Cig division controls 30% of the eCigarette industry. That news told me all I need to know about the upcoming war between tobacco companies and privately-owned small to medium cig-a-like eCigarette companies in the US, UK, and even China. It’s not going to be pretty for them.
Cig-a-likes – It’s Where The Money Is?
The biggest slice of the eCigarette industry has always gone to the mini-ecigarette segment; Blu Cigs, Green Smoke, South Beach Smoke, and…. Others, many many others… New brands keep popping up like whack-a-moles, each grabbing a tiny portion of the leftovers. It is, as we like to say, the Wild West in that segment of the industry. And it is where the money is, always has been. Not all the money certainly, but most of it. Will it stay that way or will cig-a-likes give way to better performing, and larger personal vaporizers? Will people begin to outgrow the mini-cgi faster and faster? Yea, maybe.
Because of the success of Blu Cigs you can expect to see many of the smaller brands packing up and going home, though not before dumping their stock on unsuspecting customers. That’s already happening, have you seen Bull Smoke, Premium eCigs, and others dumping their Starter Kits for $25 a pop?
If Blu Cigs has 30% of the market just one year after the buyout by Lorillard, it leaves 70% of the market to everyone else. Let’s say that the ‘larger battery’ side of the industry, the segment you and I are in, has about 15-20% of the industry, at most. That leaves about 50-55% of today’s electronic cigarette business in the hands of some 1000+ brands, all splitting up the meager numbers that make up the industry in 2012/2013. There simply are too many brands chasing too little Vapers.
Survival Mode Starts Now
Is it any wonder you’re beginning to see familiar brands slashing prices (White Cloud), dumping stock (Bull Smoke), and a few trying to hang on by handing out larger and larger commissions (EverSmoke, South Beach) to all these affiliate-heavy review sites? These are last-ditch efforts to survive the bloodbath headed their way. Only most won’t survive, and those that do will most likely be absorbed into tobacco companies.
The eCigarette Industry in 2013 is not the same industry it was even last year. Things are beginning to change quickly, and more and more companies are going belly up and that will only accelerate as the year progresses.
TheSafeCig was the first of the ‘well known’ brands to pack it in, and I suspect the reason why is that they were/are owned by financial investors, venture capitalist type who saw the writing on the wall and decided it was time to bail. Some will see the light, some won’t ever see the light, and some will have to miss a few payrolls before they get the message.
With 30% going to Blu Cigs and the FDA releasing their guidelines or regulations within the next couple of months, you can bet there are many cig-a-like CEO’s trying to figure a way out where the scenario is not leaving everything on the table and walking away. Well, at least the smart ones are.
The bloodbath has begun, and soon it will begin to flow out into the street for everyone to see. This is going to be worse then the bursting of the Internet Bubble because there are so many under-capitalized eCigarette brands out there and it won’t take much to see them destroyed.
Coming Out On Top
Lorillard is feeling pretty good right now, and that will breed even more confidence in Blu Cigs. You won’t see Blu pulling back now, or anytime soon. For them, it’s full speed ahead. But what about the others?
NJOY K is gaining traction as a popular disposable so you can expect bigger things from NJOY, and probably a buyout. A couple of other Big Tobacco projects are in the works, that we know of, and you can bet that there is a ton of money going into R&D by other Big Tobacco companies. To be as blunt as possible, I’d say 99% of the cig-a-likes you see now will be gone within a year. Big Tobacco will own those that aren’t.
Blu Cigs earnings clearly show that most consumers will trust a larger corporation over a small one in the eCigarette business, with good reason. Crooked companies that rip off consumers, Regal/Saphire, et al, only reinforce the mindset that the larger corporation can be trusted to deliver a decent product at a decent price and the small companies are selling inferior products at inflated prices and so they are to be shunned. Sadly, I think companies like Green Smoke and South Beach are going to be lumped in with Regal/Saphire by most consumers once Blu Cigs has some real company on the shelves at Walgreens, besides NJOY I mean.
So, all this begs the question; what will Big Tobacco do with the eCigarette market?
Well, after the killing fields are cleaned up and new grass and trees are planted and maybe a monument to dead erected on the field, Big Tobacco will turn its attention to each other for a while. It will be the usual competition for consumers fought by Blu, NJOY, and a handful of other Big Tobacco owned brands that will find their way onto the shelves of retail outlets.
All of this will be good for the industry as a whole, and especially good for the consumer. The quality of the cig-a-like and the ingredients used in them will shoot through the roof. Prices are going up regardless, so I wouldn’t put too much stock in thinking that Big Tobacco will be responsible for high prices… the government will be responsible for that.
There will be fewer choices in brand names, thank god, but higher quality choices from companies that are in this for the long haul…which is Big Tobacco. Perhaps the war between the anti-smoking zealots and Big Tobacco will continue, but this time Big Tobacco will finance the war for electronic cigarettes, not the now-extinct small eCigarette brands.
Re-Normalize? Fuck You!
Anti-Smoking organizations will not dry up and fly away when 50 years of work, in their eyes, could go up in flames if “smoking” is allowed to be re-normalized. Never mind the fact that as it stands eCigarettes are 100 times safer than tobacco cigarettes. The anti-smoking organizations will never allow the ecigarette to exist without a fight. There is too much at stake for them to imagine a world where people in clubs and bars are happily vaping away on cig-a-likes. It may be healthy, it may be completely harmless, but Damnit it’s SMOKING and that cannot stand. But you what? If Big Tobacco owns the cig-a-like segment of the industry it becomes their fight, not ours.
Where Does This Leave The Larger Battery And eLiquid Vendors?
That is unknowable at this point, but I suspect it will mean good things. If the FDA doesn’t kill off the industry, and I’d be surprised if it did, then the future of the electronic cigarette is assured.
The largest piece of the electronic cigarette industry will always be the cig-a-like segment, I think. Most people, most Vapers, smokers, and soon-to-be-Vapers will become fans of ZMAX’s and VAMO’s, ProVari’s and eVics, eventually. They won’t buy eLiquid by the bottle, and they will never think that filling a syringe with nicotine-infused liquid and injecting it into a Vivi Nova or AGA is sexy, until they do. It won’t happen now. This segment of the industry, the segment I play in, will grow much more slowly than the cig-a-likes, but it will grow, and then it will grow faster and faster still.
20 Million Vapers
Consider that there are 43 million smokers in the United States alone. If ten years out there are 20 million smokers, 20 million Vaper, and 3 million people who gave it all up, our part of it will have to grow exponentially for years on end in order to keep up with it. That is a great thing. And, in my mind, if the FDA allows the electronic cigarette to continue on, if science proves our case was right all along, and if Big Tobacco cleans up the excess in the cig-a-like segment, the possibility that half, or more than half, of all smokers in the US could switch to a healthier product, and a less expensive product, is certainly viable.
As I bring this to close, there are certain things happening right now that dictate the path this industry will go down. You cannot change the fact that Blu Cigs has 30% of the market. You can’t change the fact that Big Tobacco sees real opportunity now. This is going to kill off a huge number of smaller cig-a-like brands, it already is. These things are happening, and they are happening now.
I say we should embrace the entry of Big Tobacco and we should all be proud of the huge success of Blu Cigs. Vapers that use mini-eCigs will have better and safer choices in the near future. Less disease, less death, and a healthier population are all very good things no matter what. More people are turning to vaping instead of smoking, and if most of them want to vape Blu Cigs then by all means do so.
The segment of the industry that concerns myself, and probably many of you, is the segment that includes my favorite eLiquid vendors, and the vendors that sell the ZMAX’s of the world and all the cool accessories, and tanks, cartos, clearos, and all the rest. This segment of the industry is healthy and growing, and will remain so. It too will grow huge, but it will grow mainly off the radar, which is a really good thing.
So I say let the bloodbath come. Let the victors have their spoils of war. I won’t shed a tear for Bull Smoke, Smoke Frii, Premium eCigs, Green Nicotine, and all those other brands that put out lousy eCigarettes. The best will survive, in one form or another.
And, although many of you will not agree, I would rather have Big Tobacco control the cig-a-like segment of the industry rather than the Federal Government. What I really care about is all the great eLiquid artists out there and all the fine people that sell hardware to you and me at low prices and great customer service. I want them to succeed. I want them to stay around and continue to make great products, great eLiquids, and great APV’s.
I know you won’t believe me, but I sincerely believe that Big Tobacco has zero interest in taking over the segment of the eCigarette industry that we actually care about. The real money is in the mini-eCigs, and Blu Cigs 30% proves that beyond a shadow of a doubt. For now. But not forever.
I would love to hear what you think about all this, so leave a comment or two.