E-Cigs Seeing Momentum, But Who Will Own Category?

Retailers acknowledge tobacco's "deep pockets," but conversion still "minimal": Herzog

NEW YORK -- The outlook is "increasingly robust" for electronic cigarettes, according to the most recent Tobacco Talk survey conducted by Wells Fargo Securities LLC, New York. Nearly 80% of the survey respondents indicated that the category accelerated in second-quarter 2013 vs. first-quarter 2013, with annual growth topping 30%, said Bonnie Herzog, managing director of beverage, tobacco and convenience store research.

Greensboro, N.C,.-based Lorillard Inc.'s blu e-cigarette is "leading the way," she said.

"Retailers have become incrementally more positive on e-cigs and continue to praise blu, noting that its advertising and marketing efforts are driving growth to the entire category.

And although feedback was mixed on Winston-Salem, N.C.-based Reynolds American Inc.'s Vuse and Richmond, Va.-based Altria Group Inc.'s MarkTen e-cigarettes, respondents seem to reluctantly acknowledge that tobacco companies have "deep pockets to [eventually] own the category."

Many respondents noted dual use is still the norm among vapers with minimal full conversion to e-cigarettes.

The survey of tobacco retailer and wholesaler contacts representing more than 45,000 convenience stores in the United States showed that volume growth for the industry overall decelerated, but for most major brands--especially Newport Menthol--growth accelerated in the second quarter.