Wells Fargo Securities recently spoke on the “Views From Wall Street” panel at the ECig Vegas Industry Conference.
“After attending/speaking at this conference, we continue to sense uncertainty around the broad vapor category, likely driven by eventual increased regulation and where the industry is headed from a product format perspective,” noted Bonnie Herzog, managing director, beverage tobacco and convenience research for Wells Fargo Securities. “However, we remain excited about the vast potential of the vapor category, which we believe is a $2.5B retail market in the U.S. (incl. e-cigs) though estimates are as high as $4B for the industry’s current market size. We believe consumption of vapor and other non-combustible products (such as heat-not-burn) could surpass combustible cigs in the next decade and we remain convinced that technological innovation is crucial. However, it is still too early to ‘call’ which device or nicotine delivery format(s) will reign supreme.”
Herzog pointed out that while new technologies can be transformative, both industries and customers take time to adapt to changes. Due to a lack of final FDA regulations, the vapor and reduced risk nicotine product industry remains in flux. It also remains uncertain which product type will ultimately offer the right value proposition to consumers (i.e. e-cigarettes, VTMs, heat-not-burn products, nicotine inhalers, etc).
“We recognize that the timeline for broad consumer acceptance of disruptive technologies can vary (i.e. some disruptive technologies such as mobile phones and k-cups caught on fairly quickly while others such as electric cars will take longer). However, we believe the adoption of vapor/reduced risk alternatives will be faster, considering smokers are unique since they are well aware of the health risks of combustible cigs and are interested in trying non-combustible alternatives,” Herzog noted. “Once the technology improves, we expect the adoption to accelerate.”
Wells Fargo also expects Big Tobacco to be key in shaping the non-combustible nicotine industry due to its “regulation friendly” way operating, as well as deep pockets, relationships and marketing experience.