E-Cigs: From Revolution to Evolution

Mitch Morrison, Vice President of Retailer Relations

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In the early days of the dot-com era, a Roaring ’20s euphoria permeated the air. A new economy—one virtual, without bricks and stones or checks and balances—would rapidly transform the Macy’s, IBMs and Coca-Colas of the world into anachronisms.
Money was fast, hype was loud. Then the bubble burst, and good sense prevailed. Yes, the economy did transform. Yes, we now live in a virtual world, but one that intertwines with bricks and mortar. The original equations were simplistic: The notion that something with few assets only a few years old could be worth more than ExxonMobil or Walmart was absurd and dangerously misguided.
I’m brought back to the dot-com era when I listen to the excitement and hyperbole that surrounds electronic cigarettes.
Make no mistake, e-cigs, like the dot-coms, are here to stay and will grow. But will it make the old economy—cigarettes, cigars, moist smokeless—obsolete? No.
What fascinates me today about e-cigs is the ebullience of youth, the excitement of uncertainty, the promise of prosperity, the unbridled embrace of optimism.
No other product in recent memory has provoked such passions—and for good reason. E-cigs are a game changer, not only for retailers but also for smokers. In an era of social acceptance, of ubiquitous restrictions against its combustible counterparts, electronic cigarettes offer hope of “lighting up” without the strike of a match or the flick of a BIC. 
As Melissa Vonder Haar and Erik Martin share in their stellar cover feature that included more than two-dozen interviews, with the ray of excitement comes some moving clouds. These are not the vapors of e-cigarettes. They are the realities that will provide the evolutionary backdrop of this product’s growth and long-term future.
Some of these clouds will emerge from the natural forces of the free market. Others will intensify through both legitimate regulation and governmental greed.
With about 250 players in the e-cig space, a natural culling will occur. There are only so many berries in the forest to sustain a healthy deer population; the same is true for e-cig companies. I suspect four or five will dominate nationally and another six to eight will capture solid local and regional market share, helping complete a retailer’s set of three to five brands.
We’ll also see changes in technology and design. Right now a fascinating debate is occurring among e-cig makers. Should electronic cigarettes mimic traditional cigarettes in look and feel? Proponents assert such attributes will accelerate conversion of smokers to e-smokers. Critics contend that if e-cigarettes look like cigarettes, then they will face similar public smoking bans. As one colleague shared, “If enforcement can’t distinguish between a cigarette and an electronic cigarette, then it’s easier to ban both.”
Then there’s the regulatory front. Just weeks ago, the European Parliament voted to toughen regulations on the marketing and sale of tobacco. The parliament also tackled e-cigarettes, confining them to the same marketing and advertising restrictions that apply to traditional cigarettes.
Soon enough, the FDA will make its voice heard. There are certain assumptions that the majority of retailers and leading e-cig makers support, including age restrictions and purchase verification, required for all other tobacco products.
However, some e-cig makers strongly support unlimited flavors, suggesting good-tasting electronic cigarettes will hasten the conversion of cigarette puffers. Others disagree and are rolling out few flavors, believing that ultimately the FDA will place the same flavor restrictions on e-cigs that are imposed on cigarettes.
There are also questions about marketing: advertising, sampling and brand sponsorships. And what about retailing? Will countertop displays remain permissible or will e-cigs be forced to the backbar?
Then there is governmental greed. As the category prospers, governments will see electronic cigarettes as an easy budgetary cash cow, just as they do with cigarettes. 
So what can we expect? Virtually everyone agrees that today’s free-for-all climate will soon be gone. It will be replaced by a more predictable environment that includes excise taxes, packaging restrictions, minimum manufacturer liability insurance and other attributes associated with a nicotine-deliverable product.
By 2015, electronic cigarettes should be a maturing sector with agreed-upon ground rules that will buoy this business from the vicissitudes of youth to a platform of prolonged strength. 

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