Will the tobacco industry crush the e-cigarette industry – and how will it affect you?
15 great comments - add yours!
by: James Dunworth
A huge foot stamps down on a man in a suit.

Will big tobacco crush small vapers?

Hi there! There’s big moves in the tobacco and e-cigarette industry. And whether you are a smoker, a vaper , a blogger or an e-cig retailer, chances are it is going to affect you. Read this post to see what is happening, and the impact it will have on you.

A huge industry

A pile of money.

12.4 billion dollars.

That’s what the tobacco industry spent on advertising and promotional activities in 2006.

And that’s just in the US alone. (Source: CDC.)

I remember driving a mile along a street in Indonesia and seeing tobacco adverts every 50 metres. Watch tv, and you’d see a tobacco advert at least 4 times an hour.

The size of tobacco company’s marketing budgets is many, many times larger than the whole e-cigarette industry currently is.

(Side thought – I wonder how they will advertise e-cigarettes???)

Now a tobacco company has taken over one of the market leaders in the US.

Is this a trend? What will happen to e-cig users? And how will it affect YOU?

The Waiting Game

A clock ticks.

For a long time tobacco companies have been waiting on the sidelines.

In fact, I was surprised that the well-organised and well-funded campaign against e-cigarettes originated from pharmaceutical companies, not from tobacco companies. (Unless, of course, tobacco companies lobbying has been far more subtle and behind the scenes.)

We do know that, like pharmaceutical companies, they have been buying up and researching e-cigarettes.

One agent who bought a dozen kits off us let it slip that she was buying for a large tobacco company.

Waiting Over???

Question mark
A couple of weeks ago a Japan Tobacco rep told me that his company had bought a European e-cig brand.

For now, he told me, the company was just sitting on the brand.

Then one of the biggest e-cig companies in America, Blu, was bought.

Half the tobacco companies’ strategy seems clear now – wait till e-cig companies have established a brand, and then buy them out. But what then?

What are tobacco companies aims?

A tobacco executive holding a cigar and flanked by two bodyguards.

I reckon there are two possibilities.

1. Big tobacco companies will buy out e-cig companies to remove competition to tobacco products. In the short term, perhaps a $135,000,000 investment (peanuts to some of the bigger tobacco company) is worth it. But it’s a short term strategy. The space removed by each e-cig company would soon be filled up by other brands.

2. Utilise existing brands, and use superior advertising experience AND budgets to market them. We’ve long argued that in the long term, there’s just no reason for people to smoke tobacco cigarettes when they can get the same benefits without the harm of smoking. If tobacco companies have the same perspective, this is the option they will take.

Room for smaller players – if regulators allow it

Smoker's Angel Facebook Page.

Facebook allows small companies to ask customers what they want, and provide personalised service.

Yet, I think there is room for smaller players.

In these times of social media, small companies can win by:

  • providing exactly what small groups of customers want. Tobacco companies are not going to produce a particular mod that just a couple of thousand e-cig users want, but a small e-cig company can do so, and survive and thrive as a result.
  • provide the personal and friendly service that huge, anonymous corporations will never be able to do.

There’s a big IF though, and the IF is that it will only happen if the regulators allow it. There’s a chance this will happen in the UK, where regulators are not as extreme as in the US and where the Electronic Cigarette Industry Trade Association (ECITA) is going all out to create a framework of regulation which will be acceptable to authorities.

In the US, though, the FDA seems intent on crushing e-cig companies. The big companies, under big tobacco supervision, will survive and thrive as the smaller ones are forced out of business – but at a tremendous cost to you, the user.

How it will affect you?

Finger pointing at reader.

This affects you!

Obviously, if tobacco companies buy out big brands purely to stop them from being on the shelves, while regulatory authorities stamp down on smaller sellers, the result might be that you are forced back on to tobacco cigarettes. More people will die younger, but governments will continue to collect huge revenues and pay out less in pensions and health care costs. (Old age diseases cost a lot more to treat than smoking diseases.)

What I think is more likely to happen is that e-cigarette become more and more standardised. We’ll see more and more generic e-cigarettes designed to appeal to the mass market, and a lot of the huge innovation and personalised products will disappear – unless regulators allow space for smaller companies.

What do you think will happen?

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15 Responses to “Will the tobacco industry crush the e-cigarette industry – and how will it affect you?”

  1. Mikkey9 April 26, 2012 at 12:07 pm #

    We all know what is going to happen, big tobacco will lobby gov and they will legislate the small suppliers out of business , then big T will happily mass produce 20 packs of disposable e-cigs for around the same price as regular cigs and gov will tax the nicotine content! Everyone happy except the consumer.

  2. Mark Jones April 26, 2012 at 12:24 pm #

    I think the tobacco industry would have to do a lot of explaining if they try to ban what is a confirmed ‘healthier alternative’. that would be similar to a fast food chain banning veg! I think they will try to take over the industry and force the prices up inline with analogue cigarettes! I best grab that stockpile of juice quickly!

  3. James April 26, 2012 at 12:27 pm #

    Although I raised the possibility of it crushing the ecigs forever, I think you are right – tobacco companies probably see e-cigs as the future. As for prices… I have no idea. Perhaps they will try to grow brands that people will buy for the name despite high prices.

  4. Dave Atherton April 26, 2012 at 1:33 pm #

    Help may well be at hand.

    “Tobacco company buys e-cig company

    Lorillard, the American cigarette manufacturer, has bought the e-cigarette company Blu Ecigs for $135 million.”

    http://velvetgloveironfist.blogspot.co.uk/2012/04/tobacco-company-buys-e-cig-company.html

  5. James April 26, 2012 at 1:53 pm #

    Yep, that’s the one I was referring to.

  6. Greg JOnes April 26, 2012 at 7:13 pm #

    At least with e-cigs, the tobacco companies will have a steady/stable consumer base after all their smokers die off – I’ve always wondered about the business model on that level :P

  7. James April 26, 2012 at 9:38 pm #

    :) I think they rely on a combination of a steady flow of youngsters and third world markets.

  8. ecigaddict April 27, 2012 at 1:22 am #

    After one year of saving big on not buying tobacco cigs, it’s time to break the bank account on regulated e-cigarettes again. Sigh – when a good thing comes along, it usually doesn’t last.

    • James April 27, 2012 at 12:04 pm #

      After one year of saving big on not buying tobacco cigs, it’s time to break the bank account on regulated e-cigarettes again. Sigh – when a good thing comes along, it usually doesn’t last.

      Well, most of the price of cigarettes is made up of tax. Intriguingly, Bill Godshall of SmokeFree Pennsylvania recently mentioned than when he first floated the idea of increasing cigarette prices anti-smoking organisations opposed it on the basis it would make the tobacco industry a $100 billion industry!?! How they have changed their tune!

  9. Adam April 27, 2012 at 11:11 am #

    well people start using E-cigs maybe to cut down smoking Analogues or stop them completely but it is what it is advertised as a Healthier alternative to smoking it is not a cessation device so that is what the tobacco company’s r&d department are probably looking in to as it is their job to look in to the future and ppl can’t be so naive to think that they wouldn’t .
    Smoking analogues is a pastime that our governments and our directors of public health are trying to stop
    where as at the moment they have no control over e-cigs apart from propaganda spouting saying we don’t know what is in them
    but anyone with internet access and able to type can find out
    or even ask one of the governing body’s for advice
    but that is too easy I think

    • James April 27, 2012 at 12:05 pm #

      or even ask one of the governing body’s for advice

      In the UK, fortunately, the governing bodies have been reasonably positive about e-cigs.

  10. Geoff Cornwall April 28, 2012 at 11:03 am #

    I quite like electronic cigarettes but I am basically a pipe smoker and I would love to have an electronic pipe. OK, I know it is probably a nipple fetish! I also realise that I am in a minority but it would be great whether the industry is controlled or not. Presumably the nicotine has to come from somewhere. Perhaps the big companies could jump on the band wagon and turn their attention to becoming suppliers of the basic narcotic to the e-smoking industry.

    • James April 28, 2012 at 11:58 am #

      We used to sell them, and I loved them, but unfortunately the failure rate with them was too high :(

  11. GAinNY April 29, 2012 at 4:17 am #

    Cigarettes dangerous? I think not! http://smokingoutthetruth.com/the-scientific-scandal-of-antismoking/

    You’ve been sold a bill of goods.

    • James April 29, 2012 at 10:48 am #

      I’ve got the book! I like Richard, and I think some anti-smoking groups claims are exaggerated, but I don’t buy that his central contention that cigarettes are not bad for you! Even if you don’t believe the stats (and I don’t think pension companies would give smokers more generous annuities if they didn’t believe them) there’s that kick in the chest you feel the night after a heavy nights smoking, and the improvement in health so many vapers report after switching to e-cigs.

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