Tobacco

Smokers Tried Alternatives in 2018, TPE Speakers Say

Data shows decline in combustibles as trials of e-cigarettes rise
Photograph by Angel Abcede

LAS VEGAS -- While electronic cigarettes remain a relatively small slice of the nicotine pie, more and more smokers appear to be trying alternative nicotine methods, prompting major decisions from the biggest tobacco companies and stoking promise in a once-dormant tobacco category, according to speakers on the opening day of the Tobacco Plus Expo.

The three speakers, who were hosted by Lakeville, Minn.-based tobacco retailing association NATO, revealed data points and gave evidence of U.S. consumers’ curiosity for and actual trial use of e-cigarettes in 2018.

Don Burke, senior vice president of Management Science Associates, Pittsburgh, cited a 5.1% decline in combustible cigarette volume among all classes of trade in 2018, which is above the historic decline range of 3%-4%. Speaking to about 200 conference attendees at the Las Vegas Convention Center, Burke attributed the decline in large part to the increased use of e-cigarettes.

Citing distribution data to retail for 52 weeks ending in fourth-quarter 2018, Burke said volume movement for the cartridges, or pods, for e-cigarette vaping devices was up 95.2% for all channels of trade and 104.1% in the convenience and gasoline channel. “It’s a huge success,” he said.

Bonnie Herzog, managing director of consumer equity research for Wells Fargo Securities, New York, reiterated Burke’s findings, saying data she has seen showed “cigarette volume decelerating and volume pivoting to reduced-risk products.”

In her latest survey of retailers, Herzog said 30% of respondents said smokers are indeed shifting to e-cigarettes or using both combustibles and vaping devices.

She discussed Richmond, Va.-based Altria Group “pivoting” to reduced-risk products, most notably with its December 2018 purchase of a 35% minority stake in San Francisco-based Juul Labs for $12.8 billion.

On regulatory concerns, Meghan Shea, a consultant for NATO, said the U.S. Food and Drug Administration (FDA) has spoken publicly about several issues, including the levels of nicotine in cigarettes, flavors in tobacco products and the potential banning of menthol—a tobacco subsegment that accounts for about 35% of the category. While Congress has enacted laws that restricts the FDA in certain ways, she said, those same laws allow states, counties and cities to enact the same regulations.

“And local governments typically have a fast process for introducing legislation and getting it passed quickly,” she said.

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