Recharging the E-Cigarette Market

Interest and speculation abound about the future of heat-not-burn products but for now rechargeable e-cigs are in high demand.

Approximately one year ago, Philip Morris International (PM), parent company of Altria Group Inc., submitted a modified risk tobacco product (MRTP) application to the U.S. Food & Drug Administration (FDA) for its heat-not-burn iQOS brand, in hopes it would be classified as a reduced-risk tobacco product.

Industry watchers predicted approval would be granted early this year. Then came the hearing before the FDA Tobacco Products Scientific Advisory Committee in January. Officials voted in the negative on three out of four of the questions regarding health risks and label/advertising issues.

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“We wouldn’t be surprised if more data/research is requested to more effectively demonstrate the science to support the claim that switching to iQOS from combustible cigs definitely reduces risk of disease and exposure to harmful toxins, i.e., it’s a process,” declared Bonnie Herzog, senior analyst for Wells Fargo Securities. “Ultimately, we think the chances for the FDA to approve PM’s MRTP are still good, but timing is tough to predict.”

The news may have disappointed retailers looking forward to adding iQOS to their smoke-free alternative tobacco inventory, but it hasn’t affected the public’s current endorsement of the e-cigarette category.

“There’s a lot of talk within the industry so we’re aware, but I’m not sure the consumer is,” said Tim Greene, category director of tobacco and general manager for Smoker Friendly. The Boulder, Colo.-based business operates more than 100  stores in five states, including Gasamat c-stores.

According to Nielsen data, reported by Wells Fargo Securities, rechargeable refills commanded nearly three-fourths of e-cigarette sales in all retail channels for the four weeks ending Jan. 27, whereas disposables represented only 7% of sales. This is a much different picture than at the beginning of 2017.

Throughout 2016, the disposable share held steady between 33% and 39% for each quarter. The rechargeable share started that year at 17% and ended with 22%.

“The disposable was the king of the hill, but the cartridge version is now firmly in the lead,” said Ray Story, CEO of the Tobacco Vapor Electronic Cigarette Association.

The greater acceptance of rechargeable e-cigs could be tied to the popularity of British American Tobacco’s VUSE, which began taking command of market share in late 2014. By mid-2017, however, the brand began losing share, and JUUL began gaining.Most recently, JUUL led the industry with 34.1% of the unit share for e-cig refills over the first four weeks of 2018. VUSE registered 30.5%, followed by Altria’s MarkTen XL at 15.1%. Legacy e-cigarette brands, Logic, Blu, and Mistic, along with others, claimed marginal unit shares.