It’s been evident for a while now that the U.S.’s big three tobacco companies (Lorillard, Philip Morris, and R.J. Reynolds) are looking to take control of the electronic cigarette market. In April of 2012, Lorillard took the first public step by purchasing one of the biggest e-cig companies in existence — Blu Ecigs — for $135 million. Analysts now believe Big Tobacco efforts to take over the industry are likely to succeed. Wells Fargo analyst Bonnie Herzog forecasts 75% of the industry ultimately being controlled by Big Tobacco.
This is certainly a possibility, but we see 5 reasons and ways that this won’t necessarily happen. Here they are…They won’t abandon tobacco.
You know that feeling when your significant other won’t sever ties with a particularly negative past entanglement? Well, tobacco companies are going to continue getting the majority of their income from tobacco — quite possibly forever. Big Tobacco doesn’t want to embrace electronic cigarettes too much for fear that converting smokers into vapers will do one of two things. Either it will make it easier for them to move on to a different company’s product, or it will make it easier for them to kick the habit entirely. Ultimately, tobacco companies should be afraid that they might send their market packing if they embrace a product that makes it easier for customers to break loyalty.They aren’t acquainted with technology and innovation.
Until electronic cigarettes came around, cigarettes hadn’t made any profound changes since the invention of the filter in 1925. This is not an industry comfortable with change and flexibility. They came up with a products that worked (read “addicted users for a lifetime”) and, baring a few refining measures to made it more addictive, they stuck with it. Electronic cigarettes operate on a technology timeline — the kind that forces changes and updates nearly ever 3 to 6 months. It’s hard to believe these companies will be able to keep up without throwing themselves headlong into innovation and change.Small operations can thrive as long as internet sales can happen.
The reason bigger electronic cigarette entities are so willing to see internet sales bans on electronic cigarettes is because it kills small business. Online operations have significantly lower overhead, don’t require a storefront, and can avoid the massive costs involved in establishing distribution networks. The jury is still out on whether e-cig sales online will be legal beyond a year or two from now. But with open internet commerce, a lot more players can disperse the wealth.
Smoking, tobacco, and brands that sell the two have a laundry list of places they can’t appear. Even if somewhat detached from the “smoking” brand, tobacco companies may find they have a much more difficult time getting their branding and marketing engines due visibility compared to companies that are strictly e-cig focused. This also prevents these companies from using logo, icon, and product recognition as tools to promote e-cigs without hamstringing their own marketing efforts. Who knows… we could even see public health experts pushing for e-cig company subsidies to support the impending “death of smoking” that experts and regulators have been seeking for decades. The point is that political support of non-tobacco backed electronic cigarette companies might even the field between them and tobacco.The community won’t let them.
Finally, the community — you — will be the ultimate deciding factor in whether tobacco companies can seize the e-cig market. Many smokers don’t have the fondest of feelings towards their tobacco provider. The habit of smoking can be a painful journey. If someone transitions from tobacco cigarettes to electronic ones, it seems likely they may not stick with the company to which they were once loyal. The lack of change in tobacco cigarettes has led many individuals to pick a brand and flavor and stick with it — often for decades. Electronic cigarettes may offer so much flexibility and freedom of decision that users might indulge in flavors trading more than they ever would with cigarettes.
But in the end, it comes down to who consumers give their money. If the community chooses not to give its cash to tobacco companies through e-cig sales, the companies may eventually decide not to lean in on the industry they way they have then. Shaming people that using tobacco-backed e-cigs may become common practice for the community. Instead of a successful investment for Big Tobacco, it becomes a failed experiment and they go back to concentrating on what they were doing.