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TOBACCO BUSINESS INTERNATIONAL
JULY/AUGUST 2014
electric
ALLEY
says Bonnie Herzog, tobacco analyst
and managing director of Wells Fargo
Securities.
4.
E-cigs are becoming “your father’s
e-cig,” as Herzog sees it, meaning VTMs
are accelerating and are expected to
continue to accelerate at a faster rate than
traditional e-cigs. “The typical vaper is a
former smoker, [who] first tried e-cigs,
but quickly moved to tank-style systems
and eventually mods, which offer a much
stronger battery and a superior vaping
experience,” she says.
5.
Vape shops are a force to be emulated.
Recent industry estimates calculate about
5,000 to 10,000 vape shops to be operating
in the U.S., and they are catering to vape-
hungry consumers in more intimate
ways than other channels. While future
FDA regulation could negatively impact
vape shops, they are presently helping to
grow category awareness—but perhaps
at a price for c-stores, tobacco shops, and
others. Traditional channels that want to
be in the game, particularly the VTM
game, could learn to emulate the way
vape shops are educating consumers.
6.
E-vapors are akin to energy drinks.
“We think e-vapor is to tobacco what
energy drinks are to beverages,” states
Herzog. “They are profitable and quickly
growing in volume and shelf space at
retail, and increasingly gaining consumer
acceptance.”
7.
Nearly half of all adults have now
tried an e-cig—or so reports Lorillard,
which puts the exact figure at 47 percent,
with 24 percent having used an e-cig in
the past three months, and 15 percent in
the past seven days. This speaks to the
rapid trial and awareness of the category,
the company believes.
8.
Vaping is substantially more affordable
than combustible cigs and rechargeable
e-cigs. A 15ml bottle of e-juice, which
costs about $15, is roughly equivalent to
five to seven packs of combustible cigs,
according toWells Fargo research.What’s
more, the average VTM consumer’s
weekly spend is about 30 percent less
than the e-cig consumer’s weekly spend.
The expectation is that retailers will
continue to embrace e-vapor thanks
to consumer trends and the fact that
cigarette gross profit margins remain on
a downward trend. “E-cigs are probably
three times more profitable for retailers
than combustible cigs,” offers Herzog.
9.
E-juice has loyalty potential. Recent
field work at vape shops revealed that
vapers do indeed have a “go-to” juice,
despite the fact that they experiment with
flavors, brands and customizing. This
leads Herzog to believe that “there could
be more potential for brand loyalty than
we originally thought, despite the lack of
combustible cigarette-style packaging,”
she says.
10.
Segregated merchandising is the
preferred merchandising method. Half
of all retailers believe that having a
separate e-cig/vape section, preferably
near conventional cigarettes, is the
most effective way to merchandise the
category, according to a recent Wells
Fargo Tobacco Talk survey. Thirty
percent believe that they should be
merchandised with cigarettes, and 20
percent prefer to merchandise them on
the front counter. Jordan Hirsh, buyer
for Cigar King in Skokie, Illinois, is
among the latter with a separate area
devoted to the category in the front of
the store. “It’s about 20 feet [of space]
with a couple hundred SKUs [on it],” he
tells
Tobacco Business International
.
TBI
