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
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
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.
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?
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
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?
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?