Tobacco Update

Black-market woes, e-cig booms, dollar-store growth and more news from the tobacco category

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FDA to Target Underage Tobacco Use
Mitch Zeller promised more openness and hinted at open-mindedness shortly after assuming the role of the nation’s top tobacco watchdog earlier this year.

Toward that end, Zeller, head of the U.S. Food & Drug Administration’s (FDA) Center for Tobacco Products (CTP), held a wide-ranging webinar in December during which he announced a new national advertising initiative for 2014 targeting at-risk 12-to-17-year-olds across rural and urban markets, with the sole aim of halting them before they start smoking.

The initiative was the only major policy announcement during an 18-slide presentation, followed by a Q&A session.

Zeller addressed other issues:

  • Electronic Cigarettes. Zeller acknowledged e-cigarettes’ growing popularity and that his agency continues to investigate how it will regulate this emerging sector. He cited anecdotal evidence praising e-cigarettes as a cessation device for long-term smokers but said the agency must also forecast the long-term effects of e-cigarettes. For instance, citing a recent Centers for Disease Control and Prevention (CDC) report, he lamented that it “showed youth e-cig use doubled. … There are people who challenged that, but the data is what the data is.”
  • Cigars. On a question concerning regulation of cigars, especially singles and mini-packs, Zeller pointed to conversations with suppliers in the industry and hinted at a different approach for premium and lower-end cigars. “I’ve gotten the message that there may be differences with premium cigars that the FDA needs to take into account.” Specifically, he referenced the claim that minors do not buy more expensive cigars.

Industry Holds First E-Cig Forum
In November, Wells Fargo tobacco analyst Bonnie Herzog brought together leaders from the electronic-cigarette industry—along with experts from the fields of public health and regulatory issues—for Wells Fargo’s inaugural E-Cig Forum in New York.

Along with panels on health and legislative issues, Herzog sat down for “fireside chats” with the heads of 10 different electronic-cigarette companies: NJOY, Fin, V2 Cigs, Johnson Creek, Ballantyne Brands, Logic, E-Lites, blu Ecigs, Vapor Corp. and Victory Electronic Cigarettes. Attendees saw firsthand just how much interest electronic cigarettes are garnering, with one audience member dubbing the event electronic cigarettes’ “Woodstock”—something the industry would look back on as a definitive moment for the segment. What follows are some issues that were debated at the event.

­Rechargeable vs. Disposable. While some companies have committed exclusively to disposable products, believing the friendly price-point will drive sales, others see rechargeables as the future because they offer a better value for consumers, better margins and the promise of repeat business for retailers (also known as the razor-blade model).

J. Andries Verleur, co-founder and CEO of Miami-based V2 Cigs, suggested that as consumers begin to try to accept electronic cigarettes, disposable models will become obsolete. “I don’t see disposables as being a major factor five years from now,” he said. “There’s not much value in it for the consumers.”

Still, others believe there’s room for both. Fin Branding Group, Atlanta, offers both rechargeable and disposable models and reports sales are good across the board.

“We’ve even seen consumers use both products for different occasions,” said the company’s chairman and CEO, Elliot Maisel. “Our vision is that we’ll continue to sell both types.”

Design Differences. Perhaps the biggest debate of the day was whether consumers prefer e-cigarettes that look similar to tobacco cigarettes or products that would never be mistaken for their combustible predecessor. The argument for the cigarette-like model is that the similarity will make dedicated smokers more comfortable with trying a new product.

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