Will Electronic Cigarettes Pass Combustible Cigarette Sales Within The Next 10 Years – Bonnie Herzog says, “Yes”.

March 19, 2015

Since they started being sold in the United States in 2007, electronic cigarettes sales have increased each year, and recently hit the billion dollar mark in annual sales. This surge in sales of e­cigarettes and other vaporizing devices has led many industry experts to wonder if vapor will eventually pass combustible cigarette in sales.


Right now, it is difficult to estimate if it will. Sales of electronic cigarettes peaked at $2.5 billion, while regular cigarettes had sales of over $80 billion last year. Despite the discrepancy in sales figures, experts are optimistic that vapor will eventually pass combustible cigarette sales, because vapor sales are expected to grow by 24.2 percent through 2018, while the sales of combustible cigarettes have dropped by 29.6 percent since 2004.


A lot of the increase in sales is attributed to the fact that electronic cigarettes and other vapor products are considered a healthier alternative to smoking combustible cigarettes. e­cigarettes and other vapor products generally use a nicotine infused liquid that produces smokeless vapor, which is considered to be safe, because smokers don’t inhale the tar that they would if they smoked combustible cigarettes.


Another reason that people have started making the switch from combustible cigarettes to vapor, is the fact that combustible cigarettes are getting more expensive, and can cost up to $15 for a pack. Electronic cigarettes and vapor products on the other hand, cost about $1.50, going by the manufacturer’s estimates, making them the sensible choice for most people.


Bonnie Herzog, an analyst at Wells Fargo Securities, recently said that she expects the sale of electronic cigarettes and vapor products to continue rising quickly, due to the fact that people see them as having lower health risks, and also due to the fact that they are affordable. The increase in sales has forced big tobacco companies to enter the vapor market, and come up with their own electronic cigarettes and vaporizing options, which is another reason that Herzog believes that vapor will surpass combustible cigarettes in the next 10 years.


Other reasons why the sales of electronic cigarettes and other vapor products keep going up is the increasing availability in retail stores. When electronic cigarettes first started getting sold, they were mostly sold online, which was slowing down their sales because their customers had to wait to receive their products in the mail. Now, a lot of the big manufacturers have made distribution deals that make their electronic cigarettes and other products available in most tobacco stores and other retail outlets.


Also included in Herzog’s report, was a breakdown of the sales of electronic cigarettes and other vapor products. In May 2014, electronic cigarettes made up $1.4 billion of the vapor market, while vapors/tanks/mods, made up $1.1 billion. By September 2014, there was a shift in consumer preference, and e­cigarettes made up $1 billion of the vapor market, while vapors/tanks/mods made up $1.5 billion. These numbers show that not only are people turning away from combustible cigarettes, they are also starting to favor other vapor products over electronic cigarettes.


According to the report, the reasons for the current trend is the fact that while the prices of electronic cigarettes are cheaper compared to combustible cigarettes, they are still more expensive than other vapor products like mods or tanks. Users of both also say that the tanks/mods give them better flavor and vapor than most of the electronic cigarettes that they have tried.


The record sales that electronic cigarettes and vapor products are experiencing has to be good news for the manufacturers, there is some reason for concern, especially for the smaller companies. The Food and Drug Administration is under pressure by a lot of groups, including big tobacco companies, to regulate the sale of electronic cigarettes and other vapor products.


The FDA released a proposal last spring, that they are hoping to get passed. In the proposal, users have to 18 or older to be able to purchase an electronic cigarette, electronic cigarettes made after 2007, have to be approved by the FDA to be sold, which means that companies will have to list their ingredients, and hiring experts to conduct medical research on the health implications of the electronic cigarettes. The proposal is still going to take a while before it is enacted, but experts believe it will affect the blossoming electronic cigarette market.


If the FDA is eventually successful in implementing their proposal, industry experts don’t expect it to affect the sales of electronic cigarettes drastically, but it will likely increase the price that consumers pay for them, because people won’t be able to buy them online as easily as they can now, and the extra cost of manufacturing that the companies will try to get back some of the money they will be forced to spend on medical researchers and other expenses, by charging the customer more, for electronic cigarettes.


The bottom line here is that despite the calls to regulate electronic cigarettes and other vapor products, sales are still expected to increase significantly over the next decade, while the sale of combustible cigarettes continue to drop. This is why experts are predicting that vapor will eventually surpass combustible cigarettes in sales over the next decade.


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