Business

The Rise and Stall Of The E-Cigarette Market

Vaping took the world by storm in 2006/07. In the first few years of vaping, the market was made up mainly of hobbyists with a distinct lack of business acumen.

It was more a community than it was a market. It wasn’t until China really got involved in 2011 that things became cheaper and more accessible.

Of course, the invention came out of China in 2006, but after the initial push, a lot of the innovation came from Europe and the USA.

In 2011, companies like Smok and Kangertech really started getting heavily involved in the production of mainstream vaping devices, which significantly reduced the costs of vaping for the end-user.

The market has steadily grown year on year with more and more smokers making the switch. In 2011 there was a reported 11 million vapers worldwide.

That figure has grown to an estimated 41 million in 2018. The USA has the largest share of the market. Followed by the UK and then France. Vapers in these three countries spent more than $10B on vaping products in 2018.

In the second half of 2019, a combination of things happened which finally slowed growth, almost to a standstill, in the UK and Europe at least.

What Happened?

Bogus health scares in America: You may have seen the news about teenagers dying in the USA due to vaping.

What’s usually left out of these stories is that they were vaping illicit THC cartridges that contained Vitamin E acetate, a substance unsuitable for vaping.

For your average American thinking about stopping smoking, this will have made them think twice.

Bans: Various states in the USA and some countries such as India have banned vaping to varying degrees for a multitude of reasons.

In the UK, we are lucky to have far less draconian measures imposed on us by the EU’s Tobacco Product Directive regulations.

While the EU regulations feel entirely unnecessary at times, I can’t help but think they are the very thing that has saved the European vaping market from following the same path as the USA’s.

Pod Systems and nicotine salts: These little devices have become very popular over the last 12 months. Along with Nicotine salts, they have inadvertently slowed the growth of E-liquid sales due to how little e-liquid is used in them.

Nicotine salts are smoother and faster acting than traditional nicotine which allows the user to vape less frequently for a stronger hit.

Oversaturated market: Visiting Birmingham vaper expo in October, I noticed something: I’d never heard of most of the companies there. Businesses pop up, make some money and disappear as quickly as they appeared.

While we applaud their entrepreneurialism, they are making it harder for the companies in it for the long haul. They are also making it more difficult for the customer.

The market is inundated with poor quality products with expensive branding.

Too much choice, which, on the face of it, doesn’t necessarily sound like a bad thing, until we realize that most of the products are of low quality and priced highly.

It can make the whole experience disheartening and expensive for the end-user.

Why?

This is purely speculation, but it seems fairly obvious that America has a vested interest in banning E-cigarettes for two reasons:

  1. The Tobacco Master Settlement Agreement (MSA). The MSA is an agreement originally between the largest united states tobacco companies—Philip Morris, R.J Reynolds, Brown and Williamson, and Lorillard.

    The “original participating manufacturers” and the attorneys general of 46 states. The states settled lawsuits against the tobacco industry for the recovery of their tobacco-related health-care costs.

    In exchange, the companies agreed to curtail or cease certain tobacco marketing practices, as well as to pay, in perpetuity, various annual payments to the states to compensate them for some of the medical costs of caring for persons with smoking-related illnesses.

    In the MSA, the original participating manufacturers (OPM) agreed to pay a minimum of $206 billion over the first 25 years of the agreement.

    The amount of money that they are required to annually contribute to the states varies according to several factors. All payments are based primarily on the number of cigarettes sold.
  2. Unlike the UK, USA citizens pay for their own health care costs. If their government had to pay for the treatment of smoking-related diseases, it’s possible they would be much more invested in the health of their population.

Both of these reasons boil down to one main ingredient. The money of course.

What does the future hold?

With the largest vaping market (USA) in incredibly uncertain times, it’s difficult to predict exactly what the knock-on effects will be for the European vaping market.

If they completely ban e-cigarettes in the USA, a lot of the current American vapers will look to the rest of the world to buy their wares, which would potentially be good for Europe.

On the other hand, there are a lot of companies in the USA that will be looking for new markets to grow into, so we may be inundated with American brands at knock-down prices.

I doubt America can get away with an out and out ban on e-cigarettes, as much as they’d like to. An estimated 10 million people in the USA Vape and they also vote (#wevapewevote), you’d have to have a big set of cojones, as a president, to make a decision like that.

A flavor ban though, at least in some of the states, is a distinct possibility.

Vaping moves quickly. Pods systems and salt nicotine may soon be a thing of the past, which would allow the e-liquid market to continue its growth.

As with most markets, innovation drives sales. As the market ages, innovation becomes harder and harder to achieve. After all, there are only so many ways to make a battery and an atomizer better.

Whatever the future holds for the vaping market we can be sure that new trends will come and go which will continue to push and pull the market in different directions.

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