Across multiple channels (mass and convenience stores), electronic cigarette dollar sales fell 3.5% year-over-year in the period ending Aug. 8, 2015. The downward shift was driven by negative net pricing of -19.3% and relatively soft +19.5% unit growth, according to Nielsen data as reported by Wells Fargo Securities LLC.
“Though e-cig year-over-year pricing has been persistently negative, we believe it’s at least partially due to difficulty in capturing SKUs given the rapidly evolving vapor category and proliferation of vapors/tanks/mods (VTM) and refills, which tend to have a lower retail price,” explained Bonnie Herzog, managing director, tobacco, beverage and convenience store research for Wells Fargo. “Regardless, we remain encouraged by the category’s upside potential, driven by Big Tobacco’s national e-cig rollouts and believe the trial and awareness generated by Vuse and MarkTen should continue to elevate the entire category and drive incremental trial.”
What’s more, Herzog noted that VTMs are under-represented in Nielsen but are growing faster than the vapor category based information Wells Fargo has received via its “Tobacco Talk” surveys.
“While we remain bullish on vapor long-term, we acknowledge some near-term profitability headwinds as companies continue to invest in the category and data remains very difficult to capture and measure. Bottom line: we continue to believe vapor consumption could surpass combustible cigs in the next decade, driving total profit pool growth, generating a 6.6% CAGR,” Herzog said.