So much for the imminent end of Big Tobacco. E-cigarettes, which create a smokeless vapor by heating a liquid containing nicotine, have apparently given the industry quite a boost just as the anti-smoking movement was making note of several victories.
Lorillard pulled in $63 million in sales from its Blu e-cigarettes in its most recent quarter, according to Bloomberg Businessweek. That helped Lorillard claim $1.8 billion in sales overall, 10 percent more than the year before. Almost 4 percent of the tobacco giant’s revenue is now coming from e-cigarettes, as the company estimates that it now owns half of the e-cig market in the US.
Lorillard is reaping the benefits of an ad campaign that it ran in the last year featuring Jenny McCarthy and is getting “strong repeat purchases.” As it is now, Businessweek reports, the global marketplace for e-cigs is $2 billion, but that is expected to grow to $10 billion by 2017. In fact, e-cigs will outsell traditional cigarettes before the century is half over. Put that in your e-pipe and smoke it.
Of course, those numbers are based on what’s happening right now in a marketplace with little to no e-cigarette regulation, but that may be about to change. The FDA is considering placing regulations on the product much like its cancer-causing cousin, while a handful of states have moved to create their own laws against the use of e-cigs in certain settings.
“If the FDA does overly strict regulations and reads it just like cigarettes … you’re going to get a different trajectory in the category than you’re going to get if they recognize, again, that this is somewhat different on the continuum of risk,” Lorillard Chief Executive Officer Murray Kessler said on a conference call.
Reynolds American, which makes Camel and Pall Mall cigarettes, also found great success in the third quarter with its e-cigarette brand, Vuse, which it so far has only launched in Colorado. Its income in the third quarter was $457 million, up almost 9 percent compared with a year earlier, according to the Denver Business Journal.
"While it's still early days, the results [of Vuse sales in Colorado] are significantly exceeding our expectations," said Daniel M. Delen, Reynolds' president and CEO, in an analysts conference call. "Vuse is getting a great reception from consumers and retailers, and the brand has already taken the market-leading position in the state. Since Vuse went into Colorado in July, we have seen a significant expansion of the e-cigarette category."
Altria, the maker of Marlboro and Copenhagen chewing tobacco, is planning to get into the e-cig business as well, the Wall Street Journal reports, though it isn’t doing too poorly without the hot new product as part of its menu. In its most recent quarter, Altria reported a profit of $1.4 billion, up from $657 million a year earlier.
E-cigarettes are increasingly popular among those that wish to smoke indoors, those who want to quit smoking regular cigarettes, and children. And it's not just popular in the US. In France, where there are 15 million smokers, over 400 e-cigarette-related businesses have opened in the last few years, the New York Times reports.
Since there are no federal regulations yet against the use and marketing of e-cigarettes, companies have been able to advertise them in ways that general tobacco products haven’t had for decades. “The marketing that you're seeing in these cigarettes now, it's the wild west," Stanton Glantz, director of the Center for Tobacco Control Research and Education at the University of California, San Francisco, told NPR. "They're using celebrities, movies, television—it's just like getting into a time machine."
But imposing regulations on e-cigarettes is a doubled-edged sword, Forbes notes. After all, the FDA's efforts to control the sale, use and marketing of the products may lead more smokers to continue to puff on traditional cigarettes, which carry several known health risks, while the full spectrum of risks of e-cigarette use is still foggy.