Tobacco Giants Enter $50 Billion E-Cigarette Market

Tobacco Giants Enter $50 Billion E-Cigarette Market

Provided by Accuray Research LLP

The Global E-Cigarette and Vaporizer Market is poised to grow at a CAGR of around 21.9% over the next decade to reach approximately $53.8 billion by 2025.

The report provides segmentation by composition, component, product and geography. For example, the market is segmented by product into rechargeable e-cigarette, personal vaporizers and mods, disposable e-cigarette, ego and tanks, and others. Disposable e-cigarettes currently command the largest market revenue, but rechargeable cigarettes are forecast to grow at the highest CAGR by 2025.

In today’s blog, we’re going to look at 3 key factors that have been highlighted in the report.

 

Presence and Domination of Established Tobacco Brands

Competing directly with the Big Tobacco and Big Pharma companies, the e-cigarette market is flourishing amidst an overall non-uniformity of regulations globally. Philip Morris has made a cautious approach into the e-cig industry and has only made the two relatively small acquisitions of the UK brands, Nicolite and Nicocig. They have also recently announced that they will be launching iQOS, a reduced risk tobacco product that will heat tobacco as opposed to burning it. 

Altria Group Inc. has also made big steps into the market with its purchase of the popular cig-a-like brand Greensmoke for $110 million. They have also created their own brand Marketing which they have marketed aggressively in the USA and together with Vuse now own about 25% of the US market.

Reynolds American Inc. have asked the FDA to ban open tank vaporizing products (egos and mods) stating that “open-system vapor products create unique public health risks and are highly subject to adulteration and tampering”. British American Tobacco has recently identified their lack of progress into the non-tobacco market as one of their main risks going forward. They currently only have their own brand Vype a UK focused cig-a-like product. The market shows no signs of slowing down entering 2015, with yet another acquisition by tobacco monolith Japan Tobacco (JT) taking over Logic Technology, one of the leading e-cigarettes market players based out of the U.S.

Moreover, the distribution channels for e-cigarette and accessories are aligning with the fast paced growth of the market, with the emergence of dedicated vape shops among other retail outlets. Although the market is being driven on multiple promising factors such as the presence of established brands, cost-effectiveness, perceived health benefits, and product customizations, there are certain pain points such as uncertain regulatory framework, increasing incidents of e-liquid poisoning, and compatibility issues among others which must be addressed for the market to grow significantly.

Growth & Investment Opportunities

The use of e-cigarettes has seen an unprecedented increase worldwide. Vaping has been promoted as a beneficial smoking cessation tool and/or an alternative nicotine delivery device that contains no combustion by products. However, nicotine is highly addictive. There has been growing interest among manufacturers and others to allow e-cigarettes to be used indoors and in other settings where traditional cigarettes have previously been banned. There has, however, been conflicting and at times confusing information presented to the public regarding the public health risks and benefits associated with e-cigarettes.

E-cigarette is yet to gain a wide scale acceptance in the APAC (Asia Pacific) region. APAC, with countries such as China and India is home to the largest producers and consumers of tobacco products and the conversion of even a small percentage of smokers to vapers is expected to bring about significant revenue flow from these countries. In spite of being ranked lower in the global e-cigarette market revenue generation, China is currently the manufacturing hub, exporting more than 80% of the e-cigarettes and accessories produced to the U.S. and the European markets.

Ease of Access to Distribution Channels

The wholesale business is volume-centric, therefore most retailers prefer buying e-cigarettes from the wholesale distributors rather than direct from the factory. Purchasing products in bulk from wholesale companies is cost efficient and reliable. For electronic cigarettes, contemporarily there are two leading competitors in the market; USA and China. Both American and Chinese wholesale distributors currently rule the market for e-cigarette supplying because of their dependability, organisation and productivity.

Among the two contemporaries, Chinese wholesale distributors seem to take the edge because of their incredibly cheap rates. Efficiency comparisons between the different e-cigarette companies has made it clear that in terms of working, handling, and durability, all companies are almost at par with each other.

The Big Tobacco companies entered the electronic cigarette industry with strong financial influence and established distribution channels. Moreover, the distribution channels for e-cigarette are aligning with the rapid pace, with the emergence of dedicated vape shops among other retail outlets. Europe is gradually becoming home to some of the leading brands of electronic cigarettes such as Voke, SkyCig, and blu.

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(Image Credit: Ecig Click)

Published by Research and Markets

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