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TOBACCO BUSINESS INTERNATIONAL
JULY/AUGUST 2015
NEWS & TRENDS
JULY/AUGUST 2015
June’s VEI show kicked off with the
“Bonnie and Bryan Show,” as Trout-
man Sanders’ Bryan Haynes and
Wells Fargo’s Bonnie Herzog shared
their insights on the industry with
retail, manufacturer and wholesaler
attendees.
“The global market for vapor prod-
ucts is expected to be $7.3 billion by
the end of 2015,” said Herzog, a man-
aging director who follows the bever-
age, tobacco and convenience store
industries.
Herzog also commented on the
changing retail landscape, noting
that there are “as many vape shops
closing as there are opening.” Her
view is that the rapid growth of the
vapor shop retail channel will slow
as more and more c-stores get their
arms around the category. In the
meantime, however, she puts the
total number of vape shops globally
at a whopping 19,000 and says that
more than half are in the U.S.
According to Herzog, vapor/e-cig
category growth has moderated
somewhat this year, growing 8.2
percent in the first quarter of 2015
as compared with 17.4 percent
growth rate in the fourth quarter of
2014. She attributes that decline in
part to heavy promos on Vuse and
Mark Ten, “which are driving unit
momentum but not necessarily to-
tal dollar sales.” At the same time,
Herzog expressed some concern
about the decline and noted that
the future growth hinges in part on
new technology and innovation in
the category.
The presentation by Bryan Haynes
focused more on regulatory devel-
opments in the industry. Haynes ref-
erenced the ongoing wait for FDA
action, noting that the agency has
once again missed its deadline to fi-
nalize the deeming regulations it pro-
posed last April. “My expectation is
they will be finalized this year,” said
Haynes, “but then they still have to
go through the White House Office of
Management and Budget (OMB) for
review.”
Haynes also injected a hopeful
note into the session with his feel-
ing that there is a “good chance” that
FDA will change the February 15,
2007 “grandfather date” of the pre-
market tobacco application (PMTA)
review process for vapor products.
Haynes noted that there has been
indication of recognition by FDA that
vapor products are less harmful than
cigarettes and that the agency under-
stands the importance of new prod-
ucts and innovation to encouraging
cigarette smokers to switch to vapor
products. Stifling innovation would
be counterproductive, he noted.
Haynes also cautioned the indus-
try that deeming regulations are only
a “first-step—a foundational docu-
ment” and that more regulation will
follow.
He underscored the importance of
being proactive about preparing for
the likelihood that FDA will require
careful documentation of ingredi-
ents and manufacturing processes
throughout the supply chain. “Ideally
you will spell all of that out in a con-
tract with your suppliers,” he said.
“A lot of regulation applies to you
already and you need to understand
what’s coming and how it will apply
to you in the future.”
Vapor Expo International Wins Raves
The second annual vapor product trade show yielded plenty
of predictions about this growing category.