E-cigs start 2019 with strong sales, but regulatory heat could slow their momentum.
The e-cigarette category kicked off 2019 on a strong footing. According to Nielsen data, reported by Wells Fargo Securities, the segment accumulated more than $3.3 billion in retail dollar sales in all retail channels for the 52 weeks ending Jan.12, 2019.
What’s more, the convenience store industry is optimistic about this year’s profit potential. When Wells Fargo Securities surveyed approximately 55,000 c-store owners and operators in the fourth quarter of 2018, approximately half of the respondents agreed the e-cigarette category was poised to grow in 2019.
“Although the regulatory bodies in the U.S. are consistently in pursuit of devising strict regulations and heavy taxations to curb the growth of the e-cigarette market, it is expected that the trend of e-cigarettes will not be curtailed,” said Faisal Ahmad, CEO of BIS Research.
Of course, some of that positive outlook is attached to the ongoing blockbuster performance of Juul. For the same 52-week period, the device earned more than $2.2 billion, and commanded two-thirds of the dollar share. Approximately 85% of survey participants already stock Juul, and many indicated they will allocate more shelf space for the top-seller.
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Meanwhile, the category’s other brands represent a mixture of gains and losses.The British American Tobacco’s e-cig family is a good example. Vuse, its original offering, once again posted negative year-over-year dollar and unit sales despite increased pricing. The Vuse Ciro, however, jumped 2,684.7% in dollar sales and 2,639.4% in unit sales for the 52 weeks ending Jan.12, 2019.
NJoy has bounced back, too. Founded in 2006, the disposable e-cigarette manufacturer filed for chapter 11 bankruptcy in 2016, but wrapped up 2018 with a 63.2% gain in dollar sales over the previous year, and a 68.5% jump in unit sales.
Although a couple of the MarkTen products posted growth for the same period, last fall the Altria Group decided to pull it for 2019. Not long after, the manufacturer confirmed it purchased a 35% stake in Juul, which allows retailers to now stock the pod alongside its big-name cigarettes.
Still, public sentiment for the category remains under scrutiny. The U.S. Food and Drug Administration (FDA) and the U.S. Surgeon General called manufacturers on the carpet for the growing use among underage youth. In early February, then-FDA Commissioner Scott Gottlieb, MD, publicly expressed his disappointment with the Altria, JUUL transaction.
Then in the beginning of March, FDA issued draft guidance proposing:
- to end current compliance policy as it applies to flavored electronic nicotine delivery system (ENDS) products such as electronic cigarettes (other than tobacco-, mint- and menthol-flavored products)
- to prioritize enforcement of such products offered for sale in ways that pose a greater risk for minors to access these tobacco products.
manufacturers of all flavored ENDS products (other than tobacco-, mint- and menthol-flavored) that remain on the market under these new conditions to submit premarket applications to the agency by Aug. 8, 2021.
Also in the beginning of March, Gottlieb announced his resignation, citing a need to spend more time with his family.
The U.S. Food and Drug Administration (FDA) named Ned Sharpless acting commissioner. Sharpless is the director of the National Cancer Institute and supports the FDA crackdown on e-cigarettes.
“There has been a lot of uncertainty with the e-cigarette category, which I believe has worked its way into sales,” said Lisa Dell’Alba, president and CEO of Square One Markets based in Bethlehem, Pa.
So, what do c-store owners and operators do with a category that has a standout brand that’s also drawn the ire of regulators and legislators? How does that impact inventory balance and marketing strategies?
“Consumers may purchase these products for a variety of reasons, but the category seems stuck and lacks its own identity,” Dell’Alba said. “Marketing the way we have marketed cigarettes may not be the answer for current and potential consumers.”