April 20th, 2014
The European Parliament is set to vote Tuesday on proposals to regulate electronic cigarettes as part of a new tobacco control directive. This legislation directed toward minimizing smoking and access to minors in particular includes a provision to limit e cigarettes by treating them like medications in terms of approval to bringing products to market.
Europe is hardly known for its success in minimizing smoking after all, the highest rates of smoking are all in Eastern Europe, but movement by Parliament will likely encourage the U.S. to also re examine its own already controversial regulations over e cigarettes.
Smokeless smoking?
E cigarettes are small battery powered cigarettes that vaporize a solution of nicotine, the compound in cigarettes known to activate the nucleus acumbens in the brain, a center that triggers the reward cascade and is essential in establishing addiction.
This dose of nicotine provides the hit that smokers crave, without the impurities and tobacco of traditional cigarettes that are known to cause most of the detrimental health effects of smoking.
In theory, e cigarettes should provide a much healthier alternative to smokers unable to break the habit. In analogy, methadone is the “alternative” for heroin addicts, giving them a doctor prescribed and highly regulated dose of maintenance level opioid and controlling the detrimental behavioral and health effects of street heroin.
The big 3
Since the popularity of e cigarettes has risen, leaders in the tobacco industry have been acquiring e cigarette companies. If European regulations tighten on e cigarettes, it could drive market share to tobacco if these regulations do not pass, tobacco can reign supreme. For tobacco companies that already have their own e cigarette divisions, movement will more likely cause shifting of dollars within the corporation rather than an outflow of revenue.
Lorillard , the third largest tobacco company in the U.S. with 14.5% market share of traditional cigarettes, has been a leader in the e cigarette industry since their popularity arose. Known for cigarette brands Newport, Maverick, Kent, and True, Lorillard acquired Blu eCigs in April 2012 for $135 million, establishing it as a leader in the e cigarette industry. Blu eCigs currently accounts for 37.2% of the e cigarette market.
Lorillard has more at stake than the rest of the big 3 with Parliament’s upcoming vote. The U.S. based company acquired this past month UK e cigarette brand SKYCIG for 30 million pounds with an additional 30 million pounds due in 2016 upon achieving certain criteria. The acquisition was to establish a significant European presence for Lorillard, but if legislation passes to limit e cigarettes, this investment may have lower yield than hoped.
Reynolds American , the second largest tobacco brand with 23.5% of traditional cigarette market share, is known for cigarette brands Camel and Pall Mall. Reynolds has Vuse as its e cigarette arm and revamped its product this summer, planning on expanding beyond its Colorado market to the rest of the country.
Arguing that it has superior technology in delivering consistent vapors, Reynolds has been focusing heavily on marketing, recently launching a TV marketing campaign for Vuse. Legislation in 1971 banned TV advertising for cigarettes, but has yet to apply that to e cigarettes Reynolds is capitalizing on that loophole before it is likely closed.
Philip Morris International and Altria Group , known for Marlboro, are the biggest of the big 3, with Altria responsible for the U.S. market and Philip Morris International being the spin off from Altria that’s responsible for the international market. Altria controls 47.3% of the market share of traditional cigarettes and is also the leader in smokeless tobacco products but was the last of the big 3 to roll out an e cigarette. Altria recently launched its first e cigarette, MarkTen, under its Numark subsidiary this past summer.
While the big 3 dominate the e cigarette space, several companies are still formidable anklebiters. Privately owned Njoy may lead that category, owning 32% of the e cigarette market share. The company recently raised $75 million, with high profile investors including Sean Parker of Napster, Douglas Teitelbaum of Homewood Capital, and musician Bruno Mars.
Blowing smoke up investors’ bottom(line)s?
The e cigarette industry is certainly a force to be reckoned with. E cigarette sales are expected to double this year to between $1 billion to $1.7 billion. While tobacco sales are on the order of $80 billion, Bloomberg projects e cigarette sales surpassing that of traditional cigarettes by 2047. At Reynolds, analysts have estimated that its traditional cigarettes will outsell its e cigarettes only until 2021 the same analysts have estimated similar dates for Altria and Lorillard.
Anti tobacco lobby groups are lobbying hard to restrict e cigarettes but for the time being, FDA regulation has been lax at best and scientific evidence is still in development over potential harms of e cigarettes, crippling the government’s ability to justify strict regulations. The FDA has also been considering restrictions on online sales of e cigarettes in an attempt to minimize access by minors.
Currently the FDA states that the safety and efficacy of e cigarettes “have not been studied,” in terms of safety for intended use, inhalation dosages of nicotine and other chemicals with e cigarettes use, and benefits of use. Some studies have scrutinized the safety of e cigarettes after finding trace amounts of carcinogens, including formaldehyde, acrolein, and propylene glycol. Many criticisms of e cigarettes revolve around the marketing of e cigarettes as a way to taper smokers as the use of flavored e cigarettes as a way of targeting kids the FDA currently only regulates e cigarettes marketed for therapeutic use.
By anecdote, several addiction specialists in my practice suggest electronic cigarettes to patients as an alternative to smoking and as a way to bridge to complete cessation. Patients report that it helps them maintain the social function of smoke breaks, as well as the comfort they associate with the physical act of smoking many praise it as the only remedy successful to help them kick tobacco.
The movement within medical management of tobacco addiction mirror what analysts are saying about the e cigarette industry that it is growing and quickly. Even with regulations constantly in flux, there appears to be a significant movement of proponents of e cigarettes in medical practice. No physician would ever prescribe cigarettes, but several would suggest e cigarettes this general acceptance will likely make regulations more difficult and the e cigarette industry more profitable.
Eu considers ban on ‘too realistic’ e-cigarettes
BRUSSELS All electronic cigarettes now on sale in Britain would be banned and removed from shelves under new European Union proposals.
A confidential negotiating document drafted by the European Commission seeks to overturn a vote by MEPs that rejected outlawing them in their present form.
Brussels officials fear there is a risk that electronic cigarettes can develop into a gateway to normal cigarettes, according to the paper. It wants to include the smoke free alternative under a new EU tobacco products directive despite the fact they contain no tobacco.
The attempt to ban e cigarettes drew anger from suppliers in Britain, where 1.3 million have switched to the devices.
Fraser Cropper, the chief executive officer of Totally Wicked, an e cigarette supplier based in Lancashire, said Behind closed doors in Brussels, unaccountable and unelected bureaucrats are drafting proposals that will deny millions of existing and former smokers access to a safer alternative to tobacco cigarettes.
A town in northern France has become the first to impose a ban on electronic cigarettes in public buildings. Francois Digard is the mayor of Saint Lo in the La Manche region of Normandy, which passed a decree this month outlawing them.
France, which has an estimated 1.5 million e cigarette users, is mulling a ban but the mayor apparently decided to jump the gun after several non smokers said they were unhappy about the devices being smoked in public libraries.
The e cigarette is not neutral in the immediate environment. With it emitting odour and a bit of smoke it can really bother some people, Digard was quoted as saying by France Bleu Cotentin radio.
As cigarette smoking has been increasingly stigmatized, the sale of electronic cigarettes has risen dramatically.
E cigarettes consist of a battery, a cartridge containing nicotine, a solution of propylene glycol or glycerine mixed with water, and an atomizer to turn the solution into a vapour. The nicotine is delivered without a flame and without tobacco or tar and e cigarette users describe the experience as vaping rather than smoking.
They are widely considered a healthier alternative, however, the Dutch public health institute on Wednesday published a policy paper claiming electronic cigarettes are as harmful as ordinary cigarettes, saying they are addictive and contain poisonous substances.
Because the products are new and do not contain tobacco, they are outside EU law and are more or less unregulated in Britain and across Europe.
The officials in Brussels want that to change, saying the devices normalize the action of smoking. Electronic cigarettes are a tobacco related product and should be regulated within this directive. They simulate smoking behaviour and are increasingly used and marketed to young people and non smokers, said the commission negotiating paper.
The proposals would ban, by 2017, e cigarettes that produce levels of nicotine above 20 mg per ml, those with refillable cartridges or those that taste like tobacco. Suppliers say all e cigarettes now available would fall foul of the rules.
Martin Callanan, a Conservative MEP, said Forcing e cigarettes off the shelves would be crazy. It would remove a valuable support for people desperate to stop smoking and thus could potentially lead to needless deaths.
