NEW YORK -- Wells Fargo analyst Bonnie Herzog has not been shy in predicting that Big Tobacco was set to enter the world of electronic cigarettes in a big way, noting at the 2014 NATO Show that "the big manufacturers really have a huge competitive advantage." (Read the full story here).
Reynolds American’s Vuse is already enjoying that competitive advantage mere months into its national rollout, quickly rising to the top position in convenience store unit and dollar sales. According to Nielsen, Vuse had a 36.7% unit share (up from 25.8% last month) and 28.8% dollar share (up from 18.9%) in the four weeks ending Sept. 27, 2014.
Herzog pointed out in a research note that Vuse’s rapid growth is likely due in part to its lower price (22% below the e-cigarette category average) thanks to heavy couponing efforts by Reynolds, adding that she was “somewhat skeptical of Reynold’s No. 1 unit share given Vuse is in 35,000 outlets, compared to more than 100,000 for blu.”
Despite its strong retail presence, the Nielsen data showed Lorillard’s blu fell to No. 2 in c-store dollar sales (with 25.4%, down from 30.5% last month) and No. 3 in unit sales (16.8%, down from 21.2% last month). Logic, meanwhile, went from No. 2 to No. 3 in dollar sales (19.3%, down from 22.7% last month) and No. 1 to No. 2 in unit sales (18.7%, down from 23.3%).
While Vuse continued to rise, fellow Big Tobacco entrant Altria saw its MarkTen share fall for the third consecutive period, dropping to a 10.1% dollar share (vs. 11.7% in August) and a 10.1% unit share (vs. 11.4% in August).
Even with the deceleration of MarkTen sales, Herzog remains confident that Big Tobacco will be a net positive for the e-vapor market as a whole.
“We believe the trial and awareness generated by Vuse and MarkTen should help elevate the entire vapor category and drive incremental trial,” she said.
Indeed, September marked the first time e-cig dollar sales grew in the last five periods: Nielsen reports dollar sales increased by 14%, with a 44% bump in unit growth. This in spite of continued negative pricing trends for the better part of the last year (pricing was down by 21% this month)
Herzog added the she believes negative pricing is “at least partially due to difficulty in capturing and measuring the different SKUs given the rapidly evolving vapor category and proliferation of vapors/tanks/mods (VTM) and e-cig/VTM refills, which tend to have a lower retail price/refill.”
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