Experts predict a CAGR of 23.6% for closed vaping systems by 2021.
A few years ago, it seemed as if new flavors, from fruity to dessert to tropical, were being introduced every week. Nowadays, the preferred vaping product is the more diminutive pod mod.
Pod mods can be either open systems in which users add their own e-liquid or closed systems that use prefilled cartridges of liquid nicotine or nicotine salts.
According to Euromonitor International, closed vaping systems edged out the competition in 2016, $2.120 billion versus $2.108 billion. However, analysts anticipate that difference to multiply exponentially over the next few years—a forecast of 23.6% compound annual growth rate (CAGR) by 2021 for closed electronic nicotine delivery systems (ENDS) and a negative CAGR of 30.6% for open vaping devices.
“The market share of rechargeable cigalikes has plummeted due to rising popularity of closed pod systems, which eliminate the drawbacks of rechargeables, and have thus become the fastest growing product type in the past year,” said Shazlie Khan, a research analyst with BIS Research.
Consequently, the fervor surrounding e-liquids has quieted.
“We carried e-liquids for a while, but ultimately decided to discontinue due to slow sales,” said Daniel Moran, category manager for Robinson Oil Corp., which does business as Rotten Robbie. The fourth-generation family-owned business is headquartered in Santa Clara, Calif., operating 35 convenience stores.
“As consumers explored their tastes and preferences over the years, their inclination towards certain flavors, such as tobacco, menthol and fruity flavors, has become clear,” added Khan. “As a result, the introduction of new flavors is no longer an effective strategy to expand the consumer base.”
However, it appears pod mods have been able to attract a broader demographic. While there are several brands available, including Cue Vapor System, Kimsun Smart 4R, and LAAN Pod Mod, few have enjoyed the level of success JUUL has accumulated this year. The closed system device even surpassed Big Tobacco ENDS products.
In a year-to-year comparison for the 52 weeks ending Jan. 27, JUUL noted more than 652% growth in unit sales, and it runs nearly equal to British American Tobacco (BAT), maker of VUSE, for retail dollar sales—$389.3 million for BAT and $387.3 million for JUUL, per Nielsen and Wells Fargo Securities.
As a whole, the vaping category, in combination with e-cigarettes, has experienced a steady improvement over the past half year.
“Overall, our electronic business almost doubled in 2017 compared to 2016,” said Moran.
And industry watchers fully anticipate this momentum to carry on throughout 2018. Wells Fargo Securities issued an annual growth outlook of 16.8%.
Still, retailers remain concerned about local and state regulations, ranging from public vaping restrictions to raising the minimum age requirement to imposing flavor bans.