E-Cigs, Silver Bullets and Hypocrisy

By
Paul Reuter, Chairman emeritus and contributing editor

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I loved the opinion page in our SOI issue, which talked about how there are no silver bullets. That’s true, but human nature does not really let us believe that. We like to dream, and when we read the paper about someone getting a lottery check for $300 million, that feeds our belief that in fact there is gold to be had.

One thing that is not opinion: The innovative spirit of our industry never ceases, does it? We can always count on lots of new products and services seeking to become our silver bullet. However, as with all strengths, there is a counterbalancing weakness: While we have lots of products to choose from … it means we have lots of products to choose from!

Think of the success of energy drinks and what that subcategory has meant to our industry. And now we have electronic cigarettes, which went from a potential fad to a billion-dollar business.

I was especially taken with the recent Wells Fargo research report “E-Cigs Revolutionizing the Tobacco Industry.” It projects e-cigs will approach $2 billion in sales by the end of 2013 and eclipse $10 billion by 2017. “Importantly, our analysis indicates the e-cig could be margin enhancing to the combined category in the near term; we predict e-cigs margin of approximately 40%,” the report says. “Furthermore, we increasingly believe the entrance of the Big Three tobacco manufacturers could catapult the growth of the e-cigs category, driving the total conventional cig and e-cig profit pool up by a CAGR of 7% over the next decade.”

Another fact is that with every success comes a different opinion, often with a bullet to shoot holes into the opposing argument. One of my favorite people and close friends is Gus Olympidis, CEO of Family Express. If you know Gus, you know he is never without his own opinion, and it’s that intellectual curiosity and independent thinking that has made his company an unconventional conventional success.

He and I recently discussed e-cigarettes, and afterward I asked him to send me his thinking so I could share it with you:

“I was recently watching Matthew L. Myers, the president of the Campaign for Tobacco-Free Kids, on national TV, talk about his opposition to the advertising of alternative tobacco products, such as electronic cigarettes on TV. Most recently, both R.J. Reynolds and Altria joined Lorillard by announcing their entry into the electronic cigarette market, and no one should be surprised. E-cigarette sales have been growing at an astonishing rate, as the ever-increasing price of cigarettes, changing lifestyles and societal pressures are forcing some smokers to alternatives.

“Mr. Myers has been in the business of arguing against big tobacco for a long time. It seems he has been doing it for a lifetime. He was the general counsel for Tobacco-Free Kids and 13 years ago became president of the group. His mantra has always been the cause of public health. He often sites the Hodgson’s study that suggests that the adverse economic impact in the life of a smoker vs. a nonsmoker is more than $17,000. It’s about protecting kids and public health, he proclaims—or so it seemed, until recently.

“You see, Tobacco-Free Kids is against e-cigarettes. Shouldn’t the group be for electronic cigarettes? I thought Mr. Myer’s mantra was public health.

“Now, I am not a doctor, and the FDA has yet to assert the obvious, which is that e-cigarettes are remarkably less harmful than traditional cigarettes. (I wonder what is taking the FDA so long?) E-cigarettes are clearly less obtrusive for those sensitive to secondhand smoke, and there is no offensive aroma. It looks like a win-win to me.

“Mr. Myers’ argument seems to have less to do with protecting kids, and nothing to do with advocating public health. His argument has to do with jobs: the jobs of anti-tobacco advocates who are about to lose the validity of their argument, and perhaps their societal relevance.

“I don’t wish unemployment on anyone. If Mr. Myers’ relevance is about to expire, perhaps he can form a new group. He can call it ‘The Association of World-Class Hypocrites,’ and he can be its president.”

Whether about e-cigs or any other aspect of our business, we need to participate in the debate in our local and federal governments. Gus’ opinion is right. It’s up to us to decide what’s right for us to market, and it’s our obligation to help protect ourselves by being heard.  

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