With big tobacco companies introducing e-cigarettes, the category could be competing with cigarette margins by 2017.

New research from Wells Fargo shows via its proprietary e-cig interactive model suggests e-cigarette margins could surpass conventional cigarette margins by 2017.

“Based on our in-depth analysis of the tobacco industry over the next decade, we now anticipate the e-cig market will approach $2B in retail sales (including online) by the end of 2013 and eclipse $10B by 2017,” Wells Fargo noted in its June 12, 2013 newsletter.  

Wells Fargo analysis indicates that e-cigarettes could be margin enhancing to the combined category in the near term and by 2017, it is forecasting that e-cigarette margins could approach the mid 40% range, higher than current conventional cigarette margins of approximately 40%.

“We increasingly believe the entrance of the “Big 3” tobacco manufacturers could catapult the growth of the e-cig category, driving the total conventional cig and e-cig profit pool up by a CAGR of 7% over the next decade,” Wells Fargo reported.