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TOBACCO BUSINESS
MARCH/APRIL 2014
devices are more strictly regulated.However,
that topic is still open for debate, and very
much tied to how heavily, or if at all, the
FDA will regulate certain products in the
category.
Regarding the no-regulation option,
Haynes says, “I’ve heard of e-cigs with
nicotine that doesn’t come from tobacco.
In my view, the FDA doesn’t have the
authority to regulate these products. Their
jurisdiction is not tied to nicotine, but to
tobacco.”
Then there’s the issue of whether the FDA
will evaluate e-liquids and batteries, or the
electronic parts of the e-cig.“I might suggest
that they won’t,” Haynes continues. “They
don’t have the authority or the technical
competence to look at the electronics in an
e-cig.”
As for the traditional definition debate,
TomKiklas of theTobaccoVapor Electronic
Cigarette Association (TVECA) says, “We
are the ones that put this debate out there.
There are only two options: [an e-cig is
either] a medicinal device or a tobacco
product. Our position since day one has
been that we are nothing but a tobacco
cigarette with slight improvement…[the
e-cigarette category has] been around and
on the market for 400-plus years.”
SFATA, however, does not see it that
way. “We don’t agree that this is a tobacco
product; we believe it is an alternative to a
tobacco product that is very viable for the
FDAto leverage…to get people off tobacco,”
explains Cabrera. “And it’s a lot newer, it is
not 400 years old,it is a viable alternative that
could exist in its own ecosystem and should
not be treated like a tobacco product.”
This sentiment to strive for another
classification beyond what is out there
right now—a tobacco product or a medical
device—is echoed by other industry
associations. “Legally, right now there are
only two pathways, and [with] the way
we’re going now, we will be lumped into the
tobacco product area,”warns LincWilliams,
co-founder of the American E-Liquid
Manufacturing Standards Association
(AEMSA). “But just because something
is [the] law and there are only two options
doesn’t mean we have to settle; we have to
fight the fight—there are nicotine loopholes.
We don’t have to stand for just those two
options.Things can change and the fight is
worth fighting—we can change it for the
future.”
Bill Bartkowski, president of VapAria
Corporation, an e-cigarette research and
product development company, agrees.
“The judge said that if the FDA is going to
regulate [e-cigs], it needs to regulate them
as tobacco products because they’re derived
fromnicotine,but I think there is some room
to negotiate.Right now nicotine is regulated
in two areas of the FDA: the CTP’s tobacco
products and in pharmaceutical applications.
There is an attempt to combine nicotine
under one regulatory authority—one or the
other—or under some combination of the
two. Given that, the discussion is ongoing,
but there is an opportunity for e-cigs to
work to get their own classification.Today’s
path is clear, but that could change.”
Public health groups generally support
e-cigs being classified as tobacco products
so as to subject the device to additional
restrictions and taxation.
This is one of the latest topics to hit
the scene. It now appears that the market
for electronic cigarettes is becoming
divided between cig-alikes (disposable and
rechargeable e-cigarettes that come in stick
form) at one end, and personal vaporizers/
tanks/open systems/modifications or mods,
at the other.
Farrell Delman, president of the Tobacco
Merchants Association (TMA), has been
following this issue closely. “Most U.S.
players invested heavily in the cartridge
business thinking there was lots of money to
be made in the razor blade model,” he says,
referring to a practice of selling a device at
or near cost and deriving profits from the
subsequent sale of supplies for that device.
“But since the cost to the consumer for the
liquid [used in a tank-style system],based on
TMA analysis, is one-twenty-fifth the cost
of a cartridge, committed users are moving
from initiation (disposables) to vaporizers,
some of which are now appearing at retail,
versus over the Internet where [the]majority
have been sold.”
One e-cigarette vendor of the cig-alike/
stick variety recently reported to
Tobacco
Business
that it just introduced a tank-
style product because its biggest client—
Walmart—prodded them to do so. The
company initially wanted to wait for the
FDA’s regulatory proposal, but the retail
giant pressed them to move swiftly, saying
that more and more of its customers were
requesting the tank form.
This suggests amarket-changer that leaves
vendors from the other side scrambling for
more information and confirmation. “The
majors of the world want you to believe
that [the cig-alike] is the market,” confirms
Bill Seide, owner of the insurance agency
William R. Seide Agency, who insures
and closely follows the market of e-cigs,
vaporizers, e-juice and accessories. “That’s
what Lorillard, Philip Morris and Reynolds
are pushing, but the ‘in’ thing right now is
tanks, liquids and mods that center around
vaping and flavors. The problem is [that]
there is no record of those sales right now;
[cig-alikes] are tracked by Nielsen, but
nobody has any idea what this other side is
yet. I can guess from the guys I insure—it’s
in the double-digit millions.”
Even without sales data, Bonnie Herzog
and Wells Fargo Securities are tracking
the trend, and in their recent Tobacco Talk
survey,they found that more than 70 percent
of retailers currently carry or are planning to
carry tanks (see chart).
“A key trend that we see emerging is the
increasing prevalence of vapors/tanks/open
system vapor products, which we think
could be somewhat marginalizing the ‘cig-
alike’ e-cigs, but incrementally growing the
overall e-vapor category,” says Herzog. “A
number of vape shops have been opening up
across the country and although they are not
