The electronic cigarette industry is booming. The past two years in particular have seen the number of providers rocket as new manufacturers seek to take advantage of e-cigarettes popularity.
Solid statistics about the industry are difficult to come by, but the Electronic Cigarette Consumer Association claims the industry was worth between £5m-£10m in 2011, with several firms declaring annual earnings of more than £1m in the UK alone.
ECCA estimates the current UK growth is probably somewhere around 50% per year, with growth gradually slowing by 2014.
In addition, 400,000-650,000 of us are expected to be using e-cigarettes by the end of 2012 (which is still pretty small given there’s around 10-12m smokers in the UK).
In Mintel’s US electronic cigarette report, published in 2010, it predicted cigarette manufacturers would also start producing them as a way of providing customers with a ‘healthier’ way to get their nicotine fix.
And it was right; in 2011 British American Tobacco, the company that makes Lucky Strikes and Benson & Hedges among others, established Nicoventures, a company devoted to cigarette alternatives with plans to launch a nicotine inhaler by the end of 2014.
But for the most part, it’s non-tobacco companies who are leading the way. Gamucci and Elites are two of the more recognised brands, but a number of newcomers are chasing the more established players.
Freshcig is one such firm. Founder and managing director Ben Wilson told The Huffington Post UK many of the big tobacco companies were not coming into the e-cigarette market because they were too busy trying to protect their product.
“This has left the door open for new brands to get a foothold in a new emerging market,” he said.
“We’re seeing a fight for brand supremacy at the moment and big investments in marketing support not seen before in the category. We expect that there will be a degree of brand and product consolidation in the coming years as the category starts to mature.”
One online gift retailer told HuffPostUK there are now hundreds of providers in the UK.
Zak Edwards, managing director of Prezzybox.com, said six of its top 10 products are e-cigarette related.
“E-cigarettes are going to get massive; they are nowhere near saturation point,” he predicted.
“How many people do you actually see smoking them? This figure will grow purely by word of mouth if nothing else.”
Such is their popularity that e-cigarettes and related items now make up 10% of Prezzybox.com’s overall sales.
“The products are profitable, although there are lots of ‘me too’ products being introduced to the market place which is driving down the price,” Edwards added.
Why are they so popular?
Typical reasons given include the introduction of the smoking ban, people’s concern for their health and consumers trying to save money.
A pack of 20 can cost anywhere between £4 and £8 a box, whereas the starter packs for e-cigarettes retail for around £20 a kit which equates to around 100 cigarettes.
The introduction of the smoking ban in the UK in 2007 is also a factor – as soon as smoking lounges went out of airports and offices, pubs and restaurants became smokeless, die-hard smokers started looking for alternatives.
Freshcig’s Wilson said European countries’ more permissive attitude towards smoking, compared to the US for example, was also a factor.
“E-cigarettes are becoming a positive lifestyle choice. Young people in particular are actively choosing to ‘vape’ instead of smoke,” he said.
Is it healthier?
It’s fair to say the reason a significant number of smokers try e-cigarettes is as a way to cut back or stop smoking altogether.
However, as a business, the industry doesn’t regulate the products as health/medicinal, nor are they regulated as tobacco products.
This leaves them in the somewhat surprising category of lifestyle products.
They fall into the general sales products Customs & Excise classification, and fall under Trading Standards procedures for regulation.
Media headlines across the globe have not been kind to the industry in recent weeks – a number of newspapers published stories about a study by professor Christina Gratziou, who claimed her research found an immediate rise in airway resistance in our group of participants who used e-cigarettes.
This she claimed, “suggests e-cigarettes can cause immediate harm after smoking the device”.
The evidence has been roundly rubbished by the e-cigarette community, which said there was no concrete evidence to support her assumptions.
An extremely passionate letter sent to Huff Post UK and a number of other news organisations by Katherine Devlin, president of the Electronic Cigarette Industry Trade Association, explained the trade body’s position eloquently – namely:
- that the evidence for actual harm being caused was lacking
- that e-cigarettes cannot cause lower oxygen levels in the blood, as had been reported
- that many attacks on the industry come from those developing Nicotine Replacement Therapies which are worried about losing market share
- that e-cigarettes are not intended to be a quitting aid, but a consumer choice
This article doesn’t aim to fall on one side of the argument or the other – but the fact the debate is still ongoing represents one of the challenges the industry continues to face from a business perspective.
And it is interesting to note that legally, e-cigarettes still cannot claim to be harmless.
Helen Bowyer, senior associate at law firm Lewis Silkin, told us: “Advertisers cannot indicate the e-cigarettes and their nicotine dose aren’t harmful, otherwise this is likely to fall foul of the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing.”
The Advertising Standards Authority takes the view that nicotine is addictive, raises blood pressure and makes it harder for the heart to pump blood through the constricted arteries, causing the body to release fat and cholesterol into the blood.
In March 2012, it banned Cigirex’s advert after ruling its claim that its product was ‘100% safe’ was misleading.
Advertisers will have to be careful in future too, said Bowyer. “It can be argued e-cigarettes are being marketed in a glamourised manner which would appeal to a new market (not just existing smokers) and potentially teenagers/children.
“As a result of this, I would suggest that there is a real chance of further public outcry as this could lead to a new form of nicotine addiction.”
Freshcig’s Wilson warns any government interference to reclassify the productas a tobacco one, and therefore apply tobacco duty, could kill off its popularity and eliminate any money saving advantages.
“And if they are classified as a medicinal product, they will be subject to different regulation which could also force the price up, resulting in fewer people switching from tobacco products,” he continued.
A spokesman for another brand, Skycig, also told us people were wary of a product that is not approved by the government or the NHS.
“However, my appeal to the government would be to not regulate to the point where this wonderful concept is gagged like the tobacco industry,” the spokesman continued.
“I can’t see a way around how the government can yield the same level of income from what they will be losing on tobacco tax. But surely the savings made on the NHS treating smoking related illnesses would be a bonus?”
One solution could be for the market to regulate itself.
““There are signs the e-cigarette industry is taking steps to try and self-regulate,” said Lewis Silkin’s Bowyer.
“For example… advertisers are including disclaimers which make it clear the products are for over 18s, contain nicotine which may be harmful and is addictive, and that the product is intended only for existing smokers.”
If e-cigarettes can shake off the ill reputations they’ve picked up in some quarters, and if the government continues with its hands-off approach, they could be a key industry for the future.