The e-cigarette market is still young, but it is growing fast and e-cigarette companies are reaping the benefits.
For Damien Scott, commercial director at e-cigarette brand SKYCIG, the market is only just seeing the tip of the iceberg. SKYCIG, a £6 million-turnover business, currently has around 100,000 customers, but Mr Scott has his sights set on a bigger slice of the wider smoking population, which is estimated to be around ten million in the UK.
Because the e-cigarette market is still in its early stages, it is difficult to predict how large it will become. Analysts generally calculate that the UK market is currently worth around £75 million and expect it to grow to more than £200 million by 2015.
SKYCIG competitor E-Lites, another leading brand, also expects fast growth. The company currently turns over £5 million, but expects to grow this to £20 million next year, thanks to the company’s entrance into retail sales.
“It’s an exciting time for the industry,” says Mr Scott. “But the market is very competitive. There is a lot of undercutting and discounting as companies want to acquire as many customers as possible. Some are just there for a short-term fix.”
The market for e-cigarettes is split between smokers trying to kick their smoking habits and those looking for a complementary product to smoking, for example where cigarette smoking is banned.
Professor Robert West, director of tobacco studies at Cancer Research UK, says that e-cigarettes are increasingly being used for medicinal purposes. “A fairly substantial proportion of people who would have used a nicotine patch to help cut down on cigarettes are now using e-cigarettes instead,” he says.
For Nigel Quine, of London-based e-liquid manufacturer T Juice, the industry needs to market itself as a product in its own right. “We’re neither a pharmaceutical nor a tobacco product,” he explains. “Yes, we’re healthier than tobacco cigarettes, but we are not a ‘healthy’ product. We offer a brilliant social alternative for smokers.”
Consumers are increasingly demanding alternatives to traditional tobacco products
Perhaps in a defensive move, many big tobacco companies actively support the need for e-cigarettes to be considered pharmaceutical products.
“Products approved by the Medicines and Healthcare products Regulatory Agency (MHRA) would be safer as the science behind them would have been evaluated,” says David O’Reilly, group scientific director at British American Tobacco (BAT). “The challenge with e-cigarettes today is that there are no quality standards for them. That’s where the need for regulation comes in.”
BAT, which manufactures Dunhill, Kent, Lucky Strike and Pall Mall cigarettes, is investing in its own nicotine inhalation products, which the company plans to submit to the MHRA for approval soon.
“One of our companies, Nicoventures, has developed a nicotine inhalation product which we will submit for regulatory approval soon,” says Dr O’Reilly. “This will be the first regulator-approved nicotine inhalation product for smokers in the UK.”
He expects that Nicoventures’ first MHRA-approved nicotine inhalation product will be available to consumers by 2014, but the company also has other products in development.
BAT is specifically looking into “heat-not-burn” tobacco products. “If you look at the science, while nicotine is addictive, it isn’t in itself a big problem,” says Dr O’Reilly. “It’s the combustion that is – burn tobacco or lettuce and you’ll get thousands of chemicals of which about 150 are toxic. But if you gently heat the tobacco, it’s far less toxic.”
Other tobacco companies want a slice of the alternative pie too. Imperial Tobacco, which owns cigarette brands Embassy, Lambert & Butler and Davidoff, as well as tobacco brands Golden Virginia, Drum and rolling paper brand Rizla, confirms a “small investment” in a British e-cigarette business.
“The reason we’ve done this is to build our knowledge and expertise. Our investment is helping us with that process,” says Simon Evans, the company’s group press officer, adding that his company was also engaging with regulators to try and shape regulatory frameworks.
In America, R.J. Reynolds Tobacco Company, makers of Camel, also confirm they are developing alternatives to cigarettes. “In line with our strategy to transform the tobacco industry, our companies are actively working on the development of new non-combustible product innovations, ranging from vapour to nicotine replacement therapy products,” the company says. “Our operating companies are meeting the changing preferences of adult tobacco consumers.”
This is a consistent theme: consumers are increasingly demanding alternatives to traditional tobacco products. It is not the tobacco industry driving innovation, but its customers.
But what effect will the entry of large cigarette manufacturers have on the e-cigarette market? Mr Scott, from SKYCIG, says customers might not be as welcoming as tobacco companies think.
“A lot of customers want to escape big tobacco, escape from an industry that could potentially kill them. If big tobacco brands come in and take over, there will be a lot of anger. That’s why we’re focusing on creating a strong brand ourselves – we’re the good guys.”
The e-cigarette market is still young, but it is growing fast and e-cigarette companies are reaping the benefits.
