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Long term, how do you see the
vapor category evolving?
The vapor market, broadly, is estimated to be a $4.4 billion
market. We see this market continuing to grow by between
by 10-15 percent per year. However, we think e-cigarettes
like the Vuse, Logic and blu will stay flat. The technology
has limitations from a satisfaction standpoint, but it has a big
enough consumer base that it will hold steady. We also see
some type of open system continuing to exist in some shape
or form. But we think the growth will come from new tech-
nology devices like Cue and JUUL—closed-system devices
that are delivering a better experience in terms of satisfac-
tion. But there is no question that the growth will come from
the biggest market there is, which is current smokers looking
for an alternative.
Where will heat-not-burn
products like iQOS fit in?
While I have not personally tried iQOS, Altria’s executives
certainly seem excited about the potential of this category.
From what I understand about the research performed by
British American Tobacco and Philip Morris International,
consumers seem receptive to these products as a replace-
ment for traditional cigarette smoking. That said, it isn’t
clear whether any companies have filed PMTAs for heat not
burn products in the U.S., so I suspect it will be quite some
time before we see these products in the market here. When
these products are released in the U.S., I predict significant
cannibalization from cigarette sales will occur—especially
as compared to vapor products, which offer flavor options
that heat-not-burn products do not have.
Are you concerned about competing
with heat-not-burn products?
Any product which can be utilized by smokers as an alterna-
tive to cigarette smoking is welcome in my opinion. I look at
it as a good complement to what we are doing. My estimate is
that by 2025, the combined total revenue of all the alternative
products—heat-not-burn, e-vapor, closed systems like ours,
and open systems—together will equal that of combustible
[cigarettes]. That is the projection I am making.
In marketing Cue, why did you choose to go the
infomercial route? Why not a more conventional
television campaign?
We are currently using an infomercial and not classic ads
because we wanted to make education easy for consumers
who are still looking for an alternative to combustible ciga-
rettes. An infomercial is a great tool for that. Vapor stores
have done well with educating smokers about vaping as an
alternative, but we know that many consumers are intimi-
dated by the look and the style of some of the vapor stores.
In an infomercial, because it is long-form media, you can
really go into detail about explaining how to use this tech-
nology, why it is simple, and what the difference is between
this and any other technology they may have tried, such as
e-cigarettes. It is more than an ad; it is more like a television
Think about
Cue as a
Keurig-type
of model: the
more devices
there are in
the market,
the more
replacement
cartridges
people will
look to buy
in stores.
’’
’’