Electronic Cigarettes: An Investment Opportunity?
Could the electronic cigarette be the biggest investment opportunity this century?
Finance, Investment and the Electronic Cigarette
Take an extremely addictive product which kills, depending on who you listen to, between 1/3 and 1/2 of its users. Then remove all of the harmful substances except the one, single substance that causes the addiction.
Get the approval of the top names in tobacco harm reduction - professors, senior doctors and researchers like Dr Joel Nitzkin - to state that the new product has between one percent and one tenth of the percent of the old products danger.
And you end up with the electronic cigarette.
Sounds like an investment opportunity come true, doesn't it?
Electronic cigarettes have the potential to make significant inroads into both the four hundred billion dollar tobacco industry and the three billion nicotine cessation market.
While the latter is a lethal product, the former has a success rate of between just five percent (according to older studies) and 1.6% (according to more recent research) for permanent cessation.
Just one percent of the global market of both NRT and Tobacco markets would lead to an industry worth 4.3 billion dollars.
No wonder David Sweanor, former advisor to the WHO on tobacco control, said that:
"Seldom is there an offer to become a billionaire while saving millions of lives. I think there will be takers."
Business is Booming
One taker was Marian Younger, owner of True Vapour.
After using the product to end a thirty year old smoking habit, Marian poured her life savings into her venture, kicking off with a TV commercial.
When electronic cigarette advertising was effectively by a tv industry terrified of the powerful anti-smoking lobby, she set up a kiosk.
"I've now closed down my kiosk," she told us. "There was just no point - I'm doing so much business online."
Despite this, she is now worried that she is in imminent danger of losing the business she has put everthing into.
"E-Cigarettes Will Revolutionize the Face of Tobacco Smoking and Could Pose a Threat to the Smoking Cessation Market"
Unfortunately, the same opportunity that created the electronic cigarette industry is leading to seemingly insurmountable obstacles from powerful interest groups.
Big Pharm: The industry which helped manufacture, through indirect lobbying and funding, the anti-smoking atmosphere that created the demand for its products recently released an industry report which claimed: "E-Cigarettes Will Revolutionize the Face of Tobacco Smoking and Could Pose a Threat to the Smoking Cessation Market".
The Public Health Groups: These groups derive vast portions of their revenue from big pharm, from foundations with close links to big pharm and from sometimes secretive paid endorsements of big pharm's products.
Governments: Cash strapped governments make revenue from sin taxes on cigarettes which are many times the cost of the health care provision smokers need. Paradoxically, in America money from tobacco is earmarked to fund improvements in health care provision.
The Tobacco Companies: Four hundred billion dollars. Need we say more?
The result is a ban or defacto ban in many countries.
They have been banned in Australia and New Zealand and face a defacto ban in Canada.
The US Senate is also considering legislation which will require testing into alternative products - testing which experts such as Dr Joel Nitzkin says is physically impossible to carry out.
And even before the ban has gone into place, the FDA and US customs is starting to make life difficult for suppliers.
"They are holding $15,000 worth of our stock," Marian told us. "Despite the fact that there is no nicotine contained in the stock concerned." (Note - not all e-cigarettes contain nicotine.)
A Safer Investment
Electronic cigarettes may be an exciting investment, but as true investors know new industries are historically often very good at losing money - even before they have to contend with bans on their products.
For a better investment, think laterally.
With the help of Tobacco Free Kids, Philip Morris is about to ban a host of safe alternatives to its lethal products, and introduce restrictive advertising on its lesser known alternatives. It is in the process of coercing the FDA into giving approval for its products, once again persuading smokers that Tobacco is Okay. The same tobacco bill will lead to regulations on the manufacture of cigarettes that only Philip Morris is ready for.
With competition on all sides removed, official approval and an addictive product in the shops, the company can look forward to reaping the rewain rds for many years to come.
We've even thought up a new slogan for them:
"Philip Morris Cigarettes. The FDA says they're OKAY!"
The FDA says it's OKAY - in pictures