How Big Is the E-Cigarette Industry?
There is no denying that the electronic cigarette industry is booming. Just a few years ago, most people had never even heard of e-cigarettes and today, you can find them almost everywhere. If you walk into any convenience store or pharmacy, e-cigs are available right next to the tobacco-laden analog cigarettes. If you spend a day at the mall or at your local park, you will probably see at least one or two people vaping. In big cities, you can find entire bars devoted to e-cigarettes and even small towns now have vape shops where locals can buy e-liquids and starter kits. So just how big is the e-cig industry?
There are currently around 300 companies selling e-cigarettes in the United States, but the top three e-cigs bring in 85 percent of the market sales. As a whole, the e-cig industry is expected to hit $1.7 billion in the United States by the end of the year. It might not seem like much considering tobacco cigarettes will likely bring in profits of $80 billion, but the growth is phenomenal. In fact, e-cig sales have doubled since 2012 and they show no signs of slowing.
Smokers are flocking to e-cigarettes as they learn about the benefits. In a struggling economic climate, the financial benefit is enough to make many smokers switch to vaping. In most cases, smokers can get the equivalent of two packs of cigarettes from a single e-cig costing as little as eight bucks. There is no arguing against the fact that it’s a financially sound decision to switch out tobacco for electronic cigarettes.
Projections for the Future
While many have speculated on the future growth of e-cigs, the most reliable projections come from Bonnie Herzog of Wells Fargo Securities. Herzog estimated that within ten years, e-cig revenue should overtake revenue from tobacco cigarettes. Specifically, Herzog projected that tobacco giant Reynolds would have $5.2 billion in revenue from e-cigarettes, while only $3.1 billion of revenue would come from traditional cigarette sales.
Herzog predicts that all three big tobacco players (Reynolds, Altria, and Lorillard) will see a fifty percent decrease in tobacco cigarette sales by 2023. The key for these companies will be to embrace e-cigarettes and expand the market for these popular new products. “We expect the Big Three to ultimately have a meaningful presence and likely accelerate growth of the category,” she said.
Potential Issues With Regulation
At this point, the only real roadblock for the e-cig industry is potential regulation. The FDA will likely issue new e-cigarette regulations in 2014 and it could significantly impact the market. Herzog acknowledged that if the FDA regulations are too restrictive, it could deflate smoker interest in e-cigarettes and slow the growth of the industry. As the FDA debates how to classify and regulate e-cigarettes, the market has waited with a fair amount of anxiety.
If the regulations are too restrictive, large companies would have a major advantage and many small e-cig businesses would not survive. It could essentially destroy the diversity that made the e-cigarette market so unique in 2013.
Of course, there are plenty of e-cig opponents that are pushing for heavy regulation. Matthew Myers, president of the Campaign for Tobacco-Free Kids has lobbied the FDA for strict changes to the e-cig market. He said, “FDA regulation is necessary to prevent unproven and deceptive health claims about e-cigarettes, set standards for their contents, including level so highly addictive nicotine, and better understand the health risks they may pose. The e-cigarette industry portrays itself as wanting to help solve the tobacco problem, but its marketing is reminiscent of the tobacco industry in its worst days.”
On the other side of the argument, you find vaping advocates like Brad Rodu, a professor of medicine at the University of Louisville. He believes the e-cig market could expand beyond the FDA’s abilities for restrict regulations and enforcement. “It is poised to redefine tobacco use and health consequences for 45 million American smokers,” he said. “The available scientific and medical evidence documents that these products are satisfying and vastly safer cigarette substitutes. There is no legitimate rationale for oppressive regulation that would make them less accessible to smokers.
Ultimately, the e-cig market continues to experience rapid growth despite an uncertain future. Regardless of what happens in the future, this is a historic time for smokers to make better choices for a tobacco free future with the help of electronic cigarettes.