76
TOBACCO BUSINESS INTERNATIONAL
MAY/JUNE 2014
C-STORE CORNER
“There are really only 50 manufacturers of
e-cigarettes in different locations around
the world, and only about four or five make
a quality product with the right quality
control mechanisms and measurement
controls to meet the standards that the
FDA and other regulatory bodies will likely
be enforcing,” notes Brent Willis, CEO of
Victory, the company that manufactures
GreenStix for Mapco.“So it is not that easy
to get a good quality e-cigarette consistently
delivered on time as promised. Retailers
need a manufacturer who is willing to be
flexible—to partner with them and provide
them with the assurance you need to put
your own brand name on something.”
In choosing a supplier, one of Smoker
Friendly’s criteria was consistency. “When
we sat down and tried the products, the
experiencewith the one [our current supplier]
made was consistent all the way through
disposables, rechargeables and cartridges,”
says Farkas. “That’s important since people
tend to start with disposables and graduate
up the line. If the experience isn’t the same
across the line, they won’t like it.”
Ideally, retailers should look for a private-
labelmanufacturerthatiscloselymonitoring
the changing regulatory landscape.Industry
observers expect to see new regulations
regarding e-cigarette packaging, flavoring
and merchandising in the near term, and
an experienced manufacturer will be able
to advise the retailer on taking proactive
measures to possibly reduce the headaches
of having to redesign packages, rethink
flavoring, or change manufacturing
practices due to new regulations.
FDA Focus
To some extent, however, retailers are
less vulnerable to the FDA’s whims. In
fact, Smoker Friendly recently decided to
move forward with flavored e-cigarette
products—a subcategory it had avoided
out of concern that the FDA would issue
a ban—for exactly that reason. “We were
holding off for a while, thinking something
would happen with the FDA,” says Farkas.
“But flavors are the name of the game right
now; they’re really exploding. Our thinking
is that FDA action could take a while and
when they make a decision, they usually
give those of us on the retail side time to
move inventory.”
Retailers should also consider whether
they can do enough volume to justify the
investment—on their own part and on that
of their manufacturer—that developing their
own proprietary e-cigarette and building
a market for it will involve. Willis sees $1
million as the minimum threshold of sales a
retail chain will need to deliver to make the
project worthwhile for both parties.
On the plus side, if your customers try
and enjoy your proprietary brand, you’ll
benefit from the 40 to 50 percent margins
typically realized on private-label products,
as well as a bump in customer loyalty as
shoppers return to your store to load up on
their new favorite e-cigarette.
“I expect this category to significantly
grow, and retailers who don’t have an
offering in the e-cigarette may miss a
significant opportunity that is changing
the face of this very big category for them,”
sums upWillis,who notes that the category
is still young and relatively open. “Those
that have acted quickly and quietly have
done very well, but for those who haven’t, it
is not too late.They just have to be forward-
leaning.”
TBI
Private-Label E-Cigarette Checklist
• Be sure to carry other national brand e-cigarette SKUs in addition to
your private-label product.
There will always be customers looking for
name brands and you don’t want to leave money on the table by not having a
brand that they will buy. Smoker Friendly, for example, carries seven brands
in addition to its own.
• Choose your partner wisely.
Escalating reports of poorly-made e-cigarettes
exploding and patent-infringement lawsuits underscore the need to go with
a reputable manufacturer.
• Be cautious with your packaging.
Any wording that might seem to tout
the health benefits or relative safety of e-cigarettes over traditional cigarettes
will make your product an immediate FDA target.
• Live up to your claims.
In a similar vein, ensure the validity of promises
regarding the number of puffs per stick or battery life. You’ll lose customers
to misleading claims.
• Launch large.
If possible, it’s a good idea to introduce both a disposable
and a rechargeable version of your e-cigarette. You’ll gain credibility and
visual impact. Plus, customers tend to start with disposables and migrate to
rechargeable units.
