NEW YORK -- A meeting of some of the best minds in the electronic-cigarette industry went in many directions, but one resounding theme rang out loud and clear: There’s still work to do in terms of product innovation.
Last week, Wells Fargo senior tobacco analyst Bonnie Herzog hosted the second annual E-Cig Forum, bringing together some of the biggest power players in the world of vaping, public health and regulations. Joe Murillo, president of Richmond, Va.-based Altria’s vaping subsidiary NuMark, described the industry as being in the first or second inning of a baseball game with “nothing quite hitting it out of the park” just yet; CEO of the Scottsdale, Ariz.-based NJOY, Craig Weiss, pointed out that “the winning product hasn’t been invented yet; if it had, all smokers would be using it.”
Which isn’t to say that the all-day conference struck a negative tone. Quite the contrary, nearly every manufacturer expressed optimism that the industry is more than capable of developing the technology that will ultimately rival—or outdo—the actual experience of combustible cigarettes.
“Innovation is what makes this industry great,” said Christian Berkey, CEO of Johnson Creek Enterprises, Johnson Creek, Wis. “Innovation is what will carry us into the future.”
Some other prominent conclusions from the day included:
Not Your Parent’s Tobacco Products: Though Murillo noted that from a demographics standpoint, vapers are almost identical to smokers, many speakers made it a point to note that these are not actually tobacco products. Todd Miller, CEO of the Charlotte, N.C.-based Ballantyne brands, said the Mistic-maker considers itself a consumer-product-goods company and operates as such.
But perhaps the most compelling case that e-cigs are not tobacco products came from a global player. Tim Alexander Feike, senior vice president of XEO International, noted that vaping products have a life cycle of 12 to 18 months, not the 20-year standard in tobacco products, describing e-vapor as “much closer to a tech product.”
Flavor Demand Is Being Under-Estimated: Yes, tobacco and menthol-flavored e-cigs and liquids continue to be the top-selling individual flavors, but CEO of the Miami Lakes, Fla.-based International Vapor Group Nick Molina said that when you combine all the different flavors together, they’re vastly surpassing tobacco and menthol demand. The vape-shop operators in attendance echoed these sentiments, stating that 60%-90% of their repeat purchases were non-tobacco/menthol flavors.
“Tank consumers want choice,” Molina said. “They haven’t had that in cigarettes.”
Heat-Not-Burn--A Smaller Market Than Vape:The two major tobacco players in attendance both have heat-not-burn tobacco products in the pipeline: Altria through a technology-sharing agreement with Philip Morris International (which is currently testing heat-not-burn products in Japan and Europe) and Reynolds through the recently announced relaunch of its 1990’s Eclipse (now branded as Revo).
The interesting news is that, although Herzog and others have pegged heat-not-burn as a trend to watch, both companies were hesitant to call it a bigger opportunity than e-vapor. Murillo described heat-not-burn as “complimentary” to vapor, while Reynolds American executive vice president Brice O’Brien said both were viable spaces, but ultimately, “the bigger opportunity is with vapor.”
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