Encouraged by the decline in sales, tobacco manufacturers are investing heavily to secure an exceptional position in the electronic cigarette market.
Imperial Tobacco, Altria, Japan Tobacco International, Philip Morris, British American Tobacco… Cigarette manufacturers are investing heavily in vaping. And for good reason, as the use of electronic cigarettes began to explode in 2012, the revenue of cigarette manufacturers took a serious hit.
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In France alone, the French Observatory for Drugs and Drug Addiction (OFDT) noted a slow decline in tobacco sales compared to 2010, followed by a “significant drop in 2012 (-5%), confirmed in 2013 (-7.6%) and 2014 (-5.3%). An unprecedented decline, which “according to OFDT could be explained by the regularity of the price increase combined with the marked rise of electronic cigarettes in 2013.”
Millions of euros in investment
Cigarette manufacturers are not using them conditionally! In recent years, they have spent countless amounts on developing new products. The challenge is significant: according to Xerfi, the electronic cigarette market could reach 1.2 billion euros in 2016.
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“We believe that electronic cigarettes and other innovative nicotine-containing products can play an important role in reducing health risks associated with cigarettes and other tobacco products,” reads the electronic cigarettes section on the British American Tobacco (BAT) website, one of the industry leaders (Dunhill, Lucky Strike, Rothmans, etc.)
In 2013, BAT launched the Vype electronic cigarette in the UK, and the following year the Vype eStick and Vype ePen. “If our products meet the expectations of consumers looking for a safer alternative to tobacco, they will achieve the objectives of public health professionals. And this, of course, is a direct business interest for us and our shareholders. “We cannot be clearer…
A still timid breakthrough in France
In 2013, Imperial Tobacco (IT, brands Gauloises, John Player Special, Peter Stuyvesant, etc.) opened its checkbook to buy the patents of the self-proclaimed inventor of the e-cigarette for the small sum of 75 million euros. Additionally, an extra 5 million euros will be added for the development of the JAI electronic cigarette, introduced a few weeks ago by Fontem Ventures, a tech subsidiary.
In order to remain on good terms with the burists, the tobacco manufacturer reserved the exclusive distribution of this product to achieve a 10% market share of electronic cigarettes in France within a year,” said BFM TV’s Heidi Theys, development director at Fontem Ventures, last February (read “The Gauloises manufacturer uses vapor on BFM TV).
Another example of the appetite to conquer among cigarette manufacturers is the Ploom, a product launched in France a year ago by Japan Tobacco International (JTI, brands Camel, Winston, Benson & Hedges, etc.). Unlike the devices marketed by BAT and IT, the Ploom works with real tobacco, whose taste is released by heating it into vapor. This device is also available in tobacco shops.
Already respectable market shares
On the other side of the Atlantic, the market is covered by the company Njoy, independent of tobacco manufacturers. However, the latter are very active, as seen with Altria (Marlboro) and its Lorillard markets (brands not marketed in France), which paid nearly 120 million euros in 2012 for the purchase of Blu ECIG (acquired since then by IT), or the RJ Reynolds Tobacco Company (brands Camel and Winston in the United States) with its Vuse.
In the United States, the electronic cigarette market “is available in more than 130,000 stores,” explains Ghyslain Armand, founder of the specialized information site ma-cigarette.fr. We do not know the sales of these vaporizers, but we know that the company’s sales increased by 2.9% in 2014. Since April, the markets in Spain have been marketed under the name Solaris. Hello, European vapers!
Products with an aesthetic close to traditional cigarettes
The electronic cigarettes developed by tobacco manufacturers resemble conventional cigarettes and work with sealed customers. They are either rechargeable or not (we discussed this in an article titled “Electronic Cigarettes in All States” published on our site last year). These “Cigalikes” are far from winning over vapers. Indeed, despite their efforts, tobacco manufacturers “have not succeeded in surpassing the small specialized manufacturers,” explains Ghyslain Armand, who offers rechargeable and highly flexible vaporizers that are much more popular among smokers looking to quit or reduce the harms of smoking.
The double game of the tobacco industry
This is the challenge that manufacturers must face: to create an emerging and prosperous market (especially to compensate for the decline in cigarette sales observed in recent years), a market whose long-term development will put an end to the death of their core business, namely the sale of tobacco products. However, we know that faced with complex situations selling products for decades, this sector can be involved with a smile and the approval of authorities selling the premature death of a branch customer.
In the vaping industry, the theory that JTI, BAT, IT, and other Altria have found the parade by choosing products known to be significantly less effective than second and third generation vaporizers for quitting smoking. This strategy may seem crude. It is not. At the same time, manufacturers are doing everything possible to savor the board of directors of competitors who have structured the market with products more popular among vapers, because they are more effective. In 2015, the tobacco industry will have its own access to the electronic cigarette market, says Jean-François Etter, professor of public health and political scientist at the Global Health Institute, Faculty of Medicine, University of Geneva.
“You cannot imagine doing business in this field without using their influence to obtain “friendly” legislation. This means they can be used with high officials and European deputies who will sit behind closed doors and build together a wall of regulations and laws on these products. If this wall is built, small retailers and manufacturers (especially Chinese) will be excluded from this market because they will be unable to pay the teams of lawyers and scientists and the unnecessary R&D costs to enter this market.”
The tobacco directive will soon be implemented
European lawmakers have already begun to build this “wall,” to some extent with the adoption of the new tobacco directive last year, which stipulates, among other things, that manufacturers must submit a dossier for approval or notify the authorities of member states six months before marketing a new product in: would like to market their products and list not only the ingredients contained in e-liquids (information already available on the packaging of liquid bottles), but also in the vapors released.
These new rules will certainly provide consumers with better information so they can protect themselves or at least calm down. And this is an important aspect of this regulation, which, however, requires manufacturers to implement a complex and costly testing battery that we wrote about last year (“Electronic Cigarette: At the Center of the Legislator”). Therefore, they should not be part of the tobacco industry, which is disrupted by the complexity of administrative mechanisms. Less pessimistic than Jean-François Etter, Ghyslain Armand believes that the vaping sector, which has several years of explosive growth, has strong enough backing to take the measures that will allow it to meet the requirements of European lawmakers.
“In this time, a great effort will be made by liquid manufacturers and equipment manufacturers.” Vapers will be quickly repaired. The health law, which has just been adopted by the National Assembly, provides for the implementation of the tobacco directive one year after its promulgation into French law.
Tag: The explosion of electronic cigarette sales