Looking Deeper at Nielsen’s E-Cig Data

Segment continues to decelerate, but what brands are actually growing?

Published in Tobacco E-News

By  Melissa Vonder Haar, Tobacco Editor

NEW YORK -- At first glance, this month’s Nielsen’s convenience store data on electronic cigarette sales seems repetitive of last month’s numbers. In the four-weeks ending Aug. 2, 2014, blu largely retained its No. 1 position (with a 31.9% dollar share), Logic continued to grow, remaining in No. 2 for dollar share (22.9%) while taking the No. 1 unit share position from blu (with a 24.3% share, versus blu’s 23.0%), and Altria’s MarkTen and Reynolds’ Vuse further established themselves as dominant players (Altria was again No. 3 in dollar share, with 14.0%; Reynolds was again No. 3 in units, with 15.6%).

In a bit of good news, although sales were still decelerating, it was at a lesser rate: dollar sales declined 7.5% this month (verses a 12.4% decline in July), with units growing by 9.4% (last month, it was up just 0.5%).

According to Wells Fargo senior analyst Bonnie Herzog, the actual sales (though down), are something for retailers to be happy about.

“Though e-cig category dollar sales growth has been decelerating, dollar sales are meaningful,” Herzog wrote in a research note, adding that c-stores garnered $41.3 million e-cig sales during this period, up 32.3% year-over-year.

This broader view is certainly valid. But it’s also important to look at the more recent trends, which have been largely negative, both in terms of both dollar and unit sales. Industry leader blu, for example, saw its dollar sales drop by 30.5% and unit sales by 26.9% over the last four weeks. This was not a recent phenomenon: blu’s dollar and unit sales also saw declines over the last 12 weeks, dropping by 22.3% and 14.7% respectively.

In fact, only three brands saw both their dollar and unit sales grow in the last four and 12 week periods: Logic (dollar sales up 35.2%, unit sales up 51.3% in the last four weeks; up 39.6% and 57.1% in the last 12), Ballantyne Brands, Inc. (up 333.0% and 80.0%; 409.6% and 108.7%) and Reynolds (up by 4477.7% and 8072.5%; 8093.7% and 14211.3%). Altria’s MarkTen hasn’t been out long enough to track year-over-year sales changes.

Herzog, however, remains optimistic about the segment, suggesting that the national expansions of MarkTen and Vuse could “reignite category growth.”  Additionally, she pointed out that Nielsen’s data fails to track all retail outlets selling e-vapor products, including vape shops, or online sales.

“We believe negative pricing trends could be due to increased penetration of kits, which offer a lower price-per-cartomizer,” said Herzog. “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) as Nielsen e-cig data is not a proxy for the vapor category as a whole.”

With an estimated $700 million annual sales through Nielsen-tracked outlets (including c-stores), plus $650 million in non-Nielsen tracked channels (including vape shops and online sales), Herzog suggested the actual e-vapor segment is raking in some $2.5 billion per year.