Illicit vapes are top of mind for convenience-store retailers as they continue to hurt e-vapor sales, said Bonnie Herzog, managing director and senior consumer analyst at Goldman Sachs.
The prevalence of the illicit market will continue to weigh on the growth of the formal/tracked channel within vapor, Herzog said at CSP's Tobacco Plus Forum on Sept. 17 in Schaumburg, Illinois.
“Illicit e-vapor penetration is roughly 70% today, though we expect this to fall through 2035,” Herzog said.
The recent crackdown on imports from China due to tariffs has not meaningfully reduced illicit e-cigarette inventory levels, Herzog said. However, retailers are slightly more optimistic, as there has been a recent crackdown on imports from China as well as stronger customs enforcement, she said, citing Goldman Sachs Nicotine Nuggets survey of retailers and suppliers from July. The survey represents about 46,000 c-store locations across the United States.
Do retailers think the recent crackdown on imports from China, due to tariffs, has reduced illicit e-cigarette volume? Herzog said 23% of respondents from the survey agreed. If illicit e-cigarettes were completely removed from the markets, 35% of retailers indicated they believe consumers would pivot to legal vapor products.
“While more retailers are becoming optimistic that pressures from illicit e-vapor will ease in 2025, most are still negative in their outlooks for the remainder of the year,” she said.
On Monday, the Drug Enforcement Administration (DEA) announced the results of a week-long operational enforcement action dubbed Operation Vape Trail. During the operation, DEA seized more than 2.3 million vape devices and cartridges since Sept. 15.
The Department of Health and Human Services (HHS), through the Food and Drug Administration (FDA) and Customs and Border Protection (CBP), said on Sept. 10 that it seized 4.7 million units of unauthorized e-cigarette products with an estimated retail value of $86.5 million. The raids were carried out in Arizona, Florida, Georgia, Illinois, New Jersey and North Carolina.
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