New NJOY Products Will 'Bring Vape National': Herzog

Adds "new level of professionalism and marketing innovation" to category

Published in CSP Daily News

NJOY vaping e-cigarettes (CSP Daily News / Convenience Stores / Tobacco)

SCOTTSDALE, Ariz. -- In a move that one top tobacco analyst believes will bring a higher, more mainstream profile to vaping and accelerate its velocity onto the national stage, electronic cigarette maker NJOY has announced that it is refreshing and expanding its product line by introducing a rechargeable line of e-cigarettes and a "high-vapor" product or vapor-tank-mod (VTM), said Bonnie Herzog, managing director of beverage, tobacco and convenience store research for Wells Fargo Securities LLC, New York.

The company also plans to introduce a new-and-improved disposable NJOY King.

The complete product line refresh also "could help NJOY stem its recent share losses," Herzog said.

As reported in a 21st Century Smoke/CSP Daily News Flash, NJOY said that it expects to roll out its new lineup to between 35,000 and 40,000 retail outlets in July and August.

"NJOY's announcement about its new VTM gives us further conviction behind our view that VTMs will become more mainstream given its superior performance to 'cig-alike' e-cigs," said Herzog in a research note. "NJOY aims to be the first manufacturer to 'bring vape national,' leveraging its strong brand name to partner with the largest retailers … and bringing a new level of professionalism and marketing innovation to the vapor category."

She added, "We continue to believe VTMs are the future of vapor and are very encouraged by NJOY's entrance, which should propel overall vapor growth."

She further speculated that following NJOY's move, the major tobacco companies, which are jockeying for position and trying to secure their own footholds in the e-cigarette marketplace, will also follow suit into the vaping category.

"If the robust growth of VTMs continues and is not ultimately hindered by [U.S. Food & Drug Administration] regulation, we expect Big Tobacco has no choice but to enter either organically or via acquisition. Given we view VTMs as a global opportunity, we believe NJOY may opt to strategically partner with another company in order to achieve international expansion and scale," she said.

And during Tuesday's CSP Business Media Tobacco Update webinar featuring RBC Capital Markets & Equity Research tobacco analyst Nik Modi and Swedish match category management director Joe Teller, Modi said that NJOY entering the vaping market "makes sense from a vantage point that consumers are migrating to different subsets of the category. I would expect more companies to follow their lead.​"

For retailers, Herzog also wrote that she believes VTMs and e-juice "will continue to make up a bigger portion of the vapor product mix in [convenience stores]. VTMs are already present in the c-store channel, running the gamut from small independent manufacturers getting product placement in small, local chains to manufacturers like Mistic and NJOY bringing their VTM products into nearly 40,000 points of distribution over the next several months.

While e-cigs are here to stay, Herzog said she believes that "the rapid growth and staying power of VTMs serves as a 'wakeup call' for traditional e-cig manufacturers. We believe VTMs are the wave of the future, which is both an opportunity and challenge for c-store retailers. The opportunity is the fast growth and attractive margin, but the challenge for these retailers would be the high level of consumer interaction and education required. According to Wells Fargo's recent Tobacco Talk survey, more than 70% of retailers carry or plan to carry VTMs soon, and nearly 70% of retailers either already see a negative effect on traffic from vape shops or expect to see a negative effect soon, she said.