An Explosion in the Electronic Cigarette Industry
Since Herbert A. Gilbert first introduced the “smokeless non-tobacco cigarette” to the world in 1963, electronic cigarettes have come a very long way. Not only have they progressed exponentially in quality and variety, but have also exploded in popularity and sales. To illustrate just how popular electronic cigarettes are getting, we turned to sales statistics of the electronic cigarette industry as a whole. In 2008, total sales of electronic cigarettes were a modest $20 million dollars. By 2011, within just three years, this number surged nearly 1,000% to $195 million dollars. This growth continued through 2012 with another massive increase in sales to $500 million dollars. Analysts project 2013 sales to surpass $1 billion dollars—that’s a 5,000% increase in a matter of 5 years.
Very few industries see growth of this magnitude. And with stable, exponential growth, analysts all over the world see electronic cigarettes as an industry that will soon rival traditional tobacco companies. In fact, Bonnie Herzog, an analyst with Wells Fargo Bank who specializes in the tobacco industry, has claimed that the electronic cigarette industry could surpass the traditional tobacco industry (an $80 billion dollar industry) within 10 years. With these types of figures and projections, it is easy to see why there are a record number of electronic cigarette companies entering the market on a daily basis.
As we have seen with all industries, once a massive growth potential is seen, the giants step in and buy out various brands so that they can dominate the market. In 2012, Lorillard, the producer of cigarette brands such as Kent and Newport, bought out Blu Electronic Cigarettes for $135 million. NJOY Electronic Cigarettes is currently in talks with Altria, the producer of Marlboro Cigarettes, for a potential takeover as well. The tobacco giants see the huge growth potential with electronic cigarettes, and rather than fight it, they have chosen to ride the wave and dominate the industry. NJOY and Blu together make up 35% of the total electronic cigarette sales. These two purchases would give big tobacco a very big jump start in entering this rapidly expanding industry. Until now, the focus of big tobacco has been on disposable electronic cigarettes—it will be interesting to see if and when they decide to enter the refillable electronic cigarette market as well.
The bigger question, however, is whether the involvement of big tobacco companies is good for the electronic cigarette industry. On one hand, with big bucks comes big marketing, and it has already begun. Of course, each company will be promoting their own brands, but it will nevertheless bring more attention and popularity to the industry as a whole. On the other hand, many of the smaller companies are going to be overtaken by the larger corporations, which will in turn hinder the innovation of the industry as a whole. What the future holds for electronic cigarettes is yet to be determined, but one thing that is for certain is that they are here to stay.